The maximum employee 401(k) contribution limit for 2026 is increasing by $1,000 to $24,500 according to the IRS. For workers over 50, the catch-up contribution rises to $8,000, bringing the total to $32,500. With the median household income of roughly $80,000 today (employee 401(k) max = 30% of income), that’s a substantial amount of money to shelter in a tax-advantaged account each year.
For those age 60 through 63, there is a higher catch-up contribution limit of $11,250 in 2026. The higher $11,250 catch-up for ages 60-63 is in addition to the base $24,500 contribution, so the total potential deferral for someone age 60-63 could be $35,750.
When I first started working in 1999, the employee 401(k) limit was only $10,000. Despite earning just $40,000 in base salary my first year I still contributed about $3,000. And then, when I got a raise to $55,000 in 2000, the limit was still only $10,500, so I maxed it out. Back in 2000, the median household income was about $42,148 (employee max = 25% of income).
I kept maxing my it out until I left my job in 2012, walking away with roughly $300,000 in my 401(k). My returns were mediocre mainly thanks to the 2000 dotcom bust and the 2008–2009 global financial crisis. The selection of high-fee, actively-managed funds in my 401(k) to choose from didn't help either. However, $300,000 at age 34 still felt like a meaningful financial foundation.
Along the way, I built a small rental property portfolio, accumulated CDs, and invested in a taxable brokerage account. With those income streams, I felt comfortable enough to leave my job, especially after I negotiated a severance package.
I’ve always treated my 401(k) as “bonus money.” I maxed it out to reduce my taxable income and forced myself to live within my means. If the money shows up for me after age 60, fantastic. But like Social Security, I’ve never counted on it. Depending on the government to live your life is not a good strategy.
The 2026 401(k) Employer Contribution Matters
I’m thrilled about the higher $24,500 employee limit. But when you add in employer matching and profit-sharing, the total amount that can go into your 401(k) for 2026 is up to $72,000 (or up to $80,000 if you’re 50 or older). In other words, your employer could contribute up to $47,500. That’s significant!
So if your employer only offers something like a $3,000 match for contributing $3,000 yourself, just know they could contribute far more if they wanted to (and if the company had the profits). The ceiling is much higher than most employees realize.
For those of you intrepid enough to grind at startups for years, just remember: you could be giving up hundreds of thousands of dollars in easy money through employer 401(k) contributions. So bake that into your calculus when deciding whether to work 35 hours a week earning $500,000+ at Google, or 70 hours a week earning $160,000 at a startup. Big tech — or any large, established company — might quietly drop $10,000+ into your 401(k) every year just for showing up.
During my final three years at Credit Suisse, I was getting $15,000–$20,000 a year in employer profit-sharing contributions to my 401(k) as a Director (one level above VP). And Credit Suisse wasn’t even as profitable as many larger banks or big tech firms. In fact, Credit Suisse got swallowed in 2023 because it was heading to bankruptcy 11 years after I left.
Surely your employer can do better if you have more than 13 years of work experience!
Contributing the Maximum 401(k) Employee Amounts Will Make You a Millionaire
With the new $24,500 employee limit, I’m confident that anyone who consistently maxes out their 401(k) will become a 401(k) millionaire within 20 years. Below is a table showing future 401(k) values after 10, 15, 20, 25, and 30 years of max contributions, using return assumptions of 5%, 7%, 10%, and 15%.
| Years | Return | Future Value |
|---|---|---|
| 10 | 5% | $307,828.98 |
| 10 | 7% | $338,949.30 |
| 10 | 10% | $389,747.54 |
| 10 | 15% | $481,305.51 |
| 15 | 5% | $543,632.81 |
| 15 | 7% | $635,671.07 |
| 15 | 10% | $770,165.67 |
| 15 | 15% | $1,060,516.51 |
| 20 | 5% | $859,970.48 |
| 20 | 7% | $1,047,466.59 |
| 20 | 10% | $1,388,897.41 |
| 20 | 15% | $2,299,405.30 |
| 25 | 5% | $1,283,691.23 |
| 25 | 7% | $1,679,037.12 |
| 25 | 10% | $2,430,566.83 |
| 25 | 15% | $4,823,277.02 |
| 30 | 5% | $1,848,434.00 |
| 30 | 7% | $2,646,060.65 |
| 30 | 10% | $4,271,083.91 |
| 30 | 15% | $9,977,106.61 |
After getting my Empower financial review, I decided to run my own deep-dive calculation on my historical 401(k) performance. Despite contributing for only 13 years while earning a dismal <4% compound annual return, my balance still grew to about $300,000 when I left my job in 2012. I didn’t touch it afterward.
To my delight, that same $300,000 snowballed into almost $1.6 million just 13 years later, with zero additional contributions. That’s the power of compounding when the market finally cooperates. I was all in on equities, mostly tech stocks, because I treated my 401(k) as bonus money.
And here's the thing: If I had kept working and maxed out my 401(k) from 2012 to 2025, using the same compound annual growth rate. my 401(k) balance would be roughly $2,554,000 today. Oh man, another $1 million would hit the spot. I could sit back, stare at the funny money on my screen, and daydream even harder about the life of a free man.
But that extra million would also have cost me 13 more years of ~50-hour weeks, office politics, morning alarms, nonstop bi-weekly travel, and constant stress. Given how much life I’ve been able to live since 2012, the trade-off still feels worth it.
Please Max Out Your 401(k) Every Year
If you’re employed and you have access to a 401(k), please max it out every year. If not for your own retirement future, then do it for me! Fewer and fewer people have workplace retirement benefits these days, let alone employer matching. If you’ve got it, don’t waste it.
At this point in my life, if I wanted to contribute to a tax-advantaged 401(k) again, I’d basically need to go back to corporate consulting, do more private personal finance consulting, teach tennis, or drive for Uber. And even then, I wouldn’t have access to employer matching. Many workers today are incredibly fortunate in comparison.
At 48 years old now, it won’t be long until I can access my 401(k) and rollover IRA penalty-free. And although I still view these accounts as bonus money, the balance has grown large enough to fund a comfortable middle-class lifestyle after 59.5. At a 5% withdrawal rate, plus roughly 70% of estimated Social Security benefits starting at 62, I’m looking at over $110,000 a year in gross income in today’s dollars.
Build Your Taxable Accounts If You Want To FIRE
If you want to FIRE, simply contributing to an IRA or 401(k) won’t cut it. For 2026, IRA contribution limits rise to $7,500, or $8,600 if you’re 50 or older. Helpful, but not life-changing.
As you accumulate 7-figures in your 401(k), you must also prioritize building your taxable investment portfolio. This is the portfolio that will generate the passive income you can actually use before age 59½. Without it, early retirement becomes a lot more stressful and a lot less free.
If you don’t build a large enough taxable portfolio or rental property portfolio, you may find yourself scrambling for income after you leave your day job.
- You might end up starting a FIRE podcast and asking for donations during COVID.
- You might pressure your spouse to keep working for years even though you have two young kids and she desperately wants a break.
- Or, on the flip side, you might skip having kids altogether—even if you want them—because you feel financially constrained.
The lesson is simple: don’t rely on your 401(k) or the government for anything. If you want to maximize your lifestyle before age 59½, you must aggressively fund your taxable investments.
Once you hit 59½, you can withdraw from your 401(k) penalty-free. But remember, this is tax-deferred money. Every withdrawal is taxed at ordinary income rates.
The larger your 401(k) grows, the more strategic you’ll need to be with your withdrawals. That’s why contributing to a Roth IRA when you can, or doing a backdoor Roth IRA during low-income years, remains a smart financial move.
How to Consistently Max Out Your 401(k)
Here are some practical, realistic ways to make sure you hit the employee limit each year:
1. Automate Your Contributions
Set your contribution rate so you max out automatically, ideally starting in January. Once it’s out of your paycheck, you won’t miss it. Hedonic adaptation works both ways. You’re not really sacrificing, because the freedom you gain on the back end is far more valuable than any material thing you could buy today.
2. Increase Contributions With Every Raise
If you get a 3–5% raise, redirect at least 1–2% of it into your 401(k). You’ll maintain your lifestyle while boosting your savings rate. Remember: if the amount of money you're saving each month doesn't hurt, you're not saving enough!
3. Use Bonuses Strategically
If your employer allows percentage-based withholding from bonuses, crank that percentage up. Even a single bonus can get you halfway to the max.
4. Keep Your Investments Simple.
For 95% of workers, an index target date fund, S&P 500 index fund, or total market index fund is more than enough. Low fee -> higher returns -> bigger nest egg. For the first 10–15 years, your contributions will matter the most. But once your 401(k) reaches around $250,000, you’ll start seeing more years where your investment returns exceed how much you can contribute.
5. Understand Your Employer Match Formula
Many employees miss out on free money simply because they contribute unevenly throughout the year. If your plan has “true-up” matching, great. If it doesn’t, make sure you’re contributing steadily enough to capture each pay-period match.
If you can't max out your 401(k) each year, you better at least contribute up to the maximum 401(k) employer match. Never pass up free money!
A Final Word: Your Future Self Will Thank You
The 401(k) is one of the most powerful wealth-building tools available to everyday workers. The tax advantages, automation, employer match, and long time horizon create the perfect recipe for millionaire status, often faster than most people expect.
I’ve lived both sides:
- The “max it out every year” side
- And the “stopped contributing and watched it grow anyway” side
If you have the ability to max out your 401(k), do it. Your future self will never regret it.
Combine a maxed-out 401(k) with a steadily growing taxable portfolio, and you’ll put yourself in a position of true financial independence decades ahead of schedule.
Readers, what do you think of the 2026 401(k) maximum contribution levels for employees and employers? Don’t the amounts feel impressively large now? What’s preventing you or others from maxing out your 401(k) contributions each year? Have you reached 401(k) millionaire status yet? If so, how long did it take to get there?
Stay On Top Of Your Finances Like A Hawk
If you’re serious about maxing out your 401(k) and building real wealth, staying organized is half the battle. One tool I continue to rely on is Empower’s free financial dashboard, which I’ve been using ever since I left my day job in 2012. It’s still part of my regular routine for tracking net worth, investment performance, and cash flow.
My favorite feature is the portfolio fee analyzer. Years ago, it revealed I was paying roughly $1,200 a year in hidden investment fees I had no idea I was paying. The money that now stays in my pocket and compounds for my future instead of someone else’s.
If you haven’t reviewed your investments in the past 6–12 months, now’s the perfect time—especially if you’re thinking more strategically about retirement contributions for 2026 and beyond. You can do a DIY checkup or get a free financial analysis through Empower. Either way, you’ll likely uncover insights about your allocation, risk exposure, and investing habits that can lead to much better long-term results.
As always, stay proactive. A little optimization today can translate into far greater financial freedom later.
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Also don’t forget about the Mega Backdoor Roth! It is a great benefit if your company offers it through the 401k plan like mine does. It allows you to max out your “normal” 401k ($24,500) and then you can contribute more into your 401K Mega Backdoor Roth. This allows you to get to that $72K max. This is especially helpful if your income is to high to contribute to a Roth IRA as there is no income limit. https://www.fidelity.com/learning-center/personal-finance/mega-backdoor-roth
Hi Sam. Been following you since 2012 when I first came across your website while in the military looking to gain some financial literacy. It has been a pleasure following your story and watching you evolve as a person. You have been a reliable compass for me throughout my financial journey. I am currently entering the next stage of my life as well. Approaching 40 with a family and out of the military, I have saved a significant amount of retirement money, maxing out my 401k and Roth IRAs for 13 years. Continuing to max out my 401k is a no brainer. My question is when is the right time to forgo the Roth IRA and instead load up the taxable account? As others have stated, there has to be a point when you have enough in the retirement accounts and should then focus on the taxable. Thanks again for your guidance over all these years!
Howdy Greg. Thanks for your service.
I would contribute the maximum to your Roth IRA for as long as possible, while concurrently building as large a taxable portfolio as possible. The thing is, a lot of people once they hit 50 are much less enthusiastic about work and grinding as they were in their 30s and 40s. So you want a large taxable portfolio to give you more options to peace out sooner.
https://www.financialsamurai.com/after-tax-investment-amounts-by-age-to-retire-early/
Hi Sam. Great article. First time, long time here. Regarding the After Tax table you created. For a 50 year old the Gross Income @ 4% comes out to $120,000 from the $3,000,000 After tax balance. But since the net worth is $4,000,000 (additional 1M in Pre-Tax) couldn’t you theoretically pull $160,000 since this is 4% of 4M? But you would only take the money out of the After tax account so there would be no penalties, etc. Would like to know your thoughts!
Yes you can! Ultimately, it’s all the same pot, just a timing issue for withdrawals, forced or otherwise, and from a tax efficiency standpoint.
Great post Sam!
One thing I would be curious are your thoughts on, once you’ve maxed out your 401k contributions and taken full advantage of your employer match, should you always be maxing out on after-tax contributions (with an in-plan Roth conversion)?
As an example, if total retirement contributions are $72,000 for 2026, you max out the 401k at $24,500 and the employer match at $10,000, does it always make sense to add an additional $37,500 in after-tax contributions vs keeping that in a taxable account? At some point can you build TOO much of a nest egg and not enough savings to say buy a home or pay for your kids college?
Great question — and something I’ve been thinking about more as I get older and the finish line feels closer.
Once you max out the pre-tax 401(k) and capture the full match, the after-tax mega backdoor Roth can be a powerful tool. But I wouldn’t say it’s an automatic “always do it.”
The key is flexibility.
Money funneled into retirement accounts becomes “future You.” That’s great if you’re already set on the big ticket items of life. But if you’re still trying to buy a home, pay for childcare, fund 529 plans, or simply keep enough liquidity for opportunities, you can absolutely over-optimize for retirement at the expense of your current life.
Here’s how I’d think about it:
1. How strong is your taxable savings right now?
If boosting retirement contributions crowds out your ability to put at least 20% down on a home, build a meaningful taxable portfolio, or cover upcoming expenses within 5–10 years, I’d dial it back. A dollar in a taxable account buys you freedom today.
2. What’s your safe asset allocation across accounts?
People forget that stuffing too much into a Roth essentially locks money into a long-duration, high-risk asset bucket. If your taxable liquidity is low, you may feel “rich on paper but poor in cash flow.”
3. Is early retirement actually your goal?
If you plan to retire in your 40s or early 50s, you’ll need a large taxable account or passive income source. Retirement accounts won’t help you until you reach penalty-free withdrawal age.
4. Do you have major expenses coming within 5–10 years?
House, kids’ college, aging parents, business opportunities — all of these require liquidity.
For 2026 specifically:
If you’ve already saved aggressively, have a solid cash buffer, and aren’t planning big expenses soon, then yes, converting $37,500 after-tax into Roth is fantastic. Tax-free compounding is beautiful.
But if doing that leaves you with too little in taxable to handle life’s curveballs or goals, I’d rather see that money invested in a taxable brokerage. You maintain full access and can still build wealth.
Then there is your marginal tax rate to consider.
This is immensely helpful! Thank you Sam!
I just did a little model and if you max out all types of retirement contributions, assume a 2% inflation on the IRS limits and 7% investment returns, you should end with about $15m after 35-40 years working. Of which 2/3rds would be Roth
For someone living in NYC (or SF) it feels that one should only every aim for that if you can comfortably afford a $5m+ home AND you can also aim for $10m+ in taxable brokerage.
So maybe a good rule of thumb is that even with a high income, once 401k has been maxed, retirement contributions should be no more than [50]% of annual savings?
“For the first 10–15 years, your contributions will matter the most. But once your 401(k) reaches around $250,000, you’ll start seeing more years where your investment returns exceed how much you can contribute.”
The power of compound interest. My sixth grader is learning the concept of money and budgeting at school and we talked about the power of compound interest. When I showed her how the snowball is slow to accumulate but becomes much faster than what you can put in once it grows, she couldn’t comprehend how money could make so much more money than the actual money you put in. In fact, in my 40s, I’m still amazed by the power of compound interest.
Once 401ks hit seven digits, I don’t think it’s worth putting in additional money. Obviously it will be a case-by-case scenario, but decreasing it back down to 5% (to ensure you get full match) once it grows to one million seems like a decent move to tilt the scales towards living more now vs saving for the future.
One thing to watch out for: Starting 1/1/2006, the tax laws around the pre-tax 50+ catch-up contributions change. It will be a problem for people earning enough to no longer qualify for a Roth IRA or Roth 401(k). See IRS Notice 2025-67. I’m working with my tax accountant to figure out how to deal with the situation.
re: Given how much life I’ve been able to live since 2012, the trade-off still feels worth it.
YES! It is definitely worth it retiring sooner rather than later if you can do it. ;)
While I never had a working year where I maxed out my 401(k) contribution, I did ALWAYS make sure to contribute enough to receive the FULL company match. That company match is indeed FREE MONEY! Don’t leave that on the table! I also always bumped up my contribution percentage whenever I got a raise, since we were living just fine on our income before the raise. ;)
My now middle-aged (43 yo and 41 yo) sons have heard me say those two things so often, they will respond with, “Yes, you’ve told us” as soon as the subject comes up. LOL
I did not feel too bad about NOT maxing out my 401(k) because I was also contributing 3% to the company’s contributory pension – which turned into a very nice golden parachute (five year period certain payout) when I took early retirement at age 55 in 2013.The two combined (i.e., employer 401(k) + qualified pension rollover IRA contributions) made me a “tax deferred” millionaire 13 months post retirement.
Not looking forward to the time I hit RMD age … balances keep GROWING despite my best efforts to draw them down. (Although I just can NOT bring myself to fly first class. LOL)
Got to love the lifetime pension! Amazing how quickly time flies right?
I hope you find ways to enjoy spending more money on yourself. It also always feels good to help others.
I enjoyed giving my latest book to the teachers and administrators at my school. Some took the books to heart and have started talking more about personal finance as a result.
Really enjoyed this timely article, Sam. Having started a small business 23 years ago, my first few years contributing to my retirement account were pretty thin as the demands of a new business and small kids at home stretched us. I’ve attempted to make up for this by maxing out Simple IRA contributions and also funding an after tax brokerage account with any additional funds each year. It’s fun to watch both balances grow and provide a little feeling of safety as my wife and I enter our 50s. Thanks for article.
Jim
You’re welcome Jim. It does feel great to contribute and watch the balance grow most of the time. It’s kind of crazy how the compounding really starts taking off after about $250,000 accumulated.
Let’s hope the bull market continues!
Glad to see the level going up. It took me some time to be able to max out my 401k. But once I got to a steady enough salary that I could comfortably do that, I felt so grateful and excited to be able to do so. That’s when I really felt like my retirement savings was finally actually getting somewhere.
Looking back on my younger life and thinking about the upcoming generations, I understand why it’s so hard to think about retirement in your 20s and early 30s. At that age, we’re so focused on just getting our careers started and growing in a direction we actually want. I plan on hounding my kids to start their financial planning early once they’re adults. We’re doing a lot of prep work for them now, but I want them to be self-aware and responsible enough to take over their finances once they’re living by themselves.
Very important topic, especially for young folks. I’m in the fire service and will have a modest pension (which has no COLA) when i retire at 55, BUT our self funded 457 is really what will give us our quality in retirement. Because I’ll be 52 in 2026, I will qualify (for the next 3 years), for the “special catch up”. This is double the annual max so, $24,500 + $24,500 for a total of $49k, pretty powerful considering my plan is to not touch the 457 account until 65 for MAGI ACA purposes. I’m already preaching to the younger guys to fund that account as early and as much as possible. Thanks Sam for yet again a great topic!
I thought for 2026 there was a “Super Catch-Up” contribution of $11250 for those age 60-63 because of provisions in Secure Act 2.0.
There’s that too! But man, at 60-63, kinda seems pointless to contribute so much when you’re near retirement and should already have enough.
When I’m over 60, I will be laser-focused on spending, not saving.
What are your thoughts?
Realy Sam, spending not Kids?
I could try to have kids in my 60s too I guess. They are truly a blessing after eight years of full-time parenthood.
I’m 60 and still contribute to my 401k. I like the tax deduction. My lifestyle hasn’t been affected negatively. Seeing that 401k continue to grow ENHANCES my life. lol
“According to the most recent data from the Employee Benefit Research Institute’s analysis of Federal Reserve statistics, only about 1.8% of U.S. households have at least $2 million in retirement accounts, and fewer than 0.8% have $3 million or more. This suggests that the share with $2.5 million or more is somewhere between 0.8% and 1.8%, likely closer to 1%.”
Here to say, it CAN be done. Even for those who don’t fly at the lofty heights that Sam occupies. :)
Always appreciate your articles. Thank you.
Time to finish machining out my 2025 contributions!