Why pre-tax contributions cost less than you think
Traditional 401(k), 403(b) and 457(b) contributions come out of your pay before income tax. If you're in the 22% federal bracket and pay NC tax, a $1,000 contribution lowers your tax by about $260, so your take-home pay drops by only about $740.
2026 contribution limits
- Employee contribution: $24,500
- Catch-up, age 50 and over: $8,000 more ($32,500 total)
- Super catch-up, age 60 to 63: $11,250 more ($35,750 total)
Employer matching contributions don't count toward your $24,500 limit.
New Roth catch-up rule
Starting in 2026, if your prior-year wages from the employer were over $150,000, your catch-up contributions must go in as Roth (after-tax). They grow tax-free, but they don't lower this year's tax.
Don't skip the match
If your employer matches contributions, contributing at least enough to get the full match is usually the best return available to you.
Frequently asked questions
What is the 401(k) limit for 2026?
$24,500 for employee contributions, plus an $8,000 catch-up if you're 50 or older, or an $11,250 catch-up if you're 60 to 63. Total contributions including your employer's share are limited to $72,000 (plus catch-ups).
Do 401(k) contributions reduce Social Security tax?
No. Traditional 401(k) contributions lower federal and state income tax, but Social Security and Medicare tax still apply to them.
Should I choose a traditional or Roth 401(k)?
Traditional is often better if you expect a lower tax rate in retirement; Roth if you expect a higher one. Try our Roth vs. traditional calculator to compare.