401k Contribution Limits 2026: Max Out Guide + Employer Match Strategy

At my last job at a tech company in Austin, I watched my colleague Marcus — smart guy, good salary, probably pulling $120K — leave $6,000 in free employer match on the table every year for THREE years. That's $18,000 in free money. Gone. Vaporized. Because he "didn't want to lock up" his money.

I almost flipped the table.

Marcus wasn't broke. He wasn't struggling. He just hadn't taken the time to understand how his 401k actually worked. And that kills me, because his employer's matching contribution was literally part of his compensation package — compensation he earned and then chose not to collect.

I'm writing this guide so you don't become Marcus.

The 2026 contribution limits are now out — and they're higher than ever. Whether you're just starting to think about retirement savings, or you're a veteran optimizing every last dollar, this is your complete playbook. We'll cover the actual IRS numbers, the Traditional vs. Roth decision, employer match strategy, the mega backdoor Roth, what to do as an H1B visa holder, and a lot more.

Let's get into it.

2026 401k Contribution Limits: The Official IRS Numbers

The IRS released the official 2026 retirement plan limits in Notice 2025-67. Here's exactly what you're working with:

Employee Elective Deferral Limit

$24,500 — that's the maximum you can contribute from your own paycheck to a 401k in 2026. This is up from $23,500 in 2025. Not a massive jump, but $1,000 more is $1,000 more.

This limit applies to:

Traditional 401k plans
Roth 401k plans
403(b) plans
Most 457(b) governmental plans
The federal Thrift Savings Plan (TSP)

Catch-Up Contribution Limit (Age 50 and older)

If you're 50 or older, you get an extra shot. The catch-up contribution limit in 2026 is $8,000, up from $7,500 in 2025.

That means people 50 and older can contribute up to $32,500 total in 2026.

The "Super" Catch-Up (Ages 60-63) — SECURE 2.0 Game-Changer

Here's where it gets interesting. Thanks to the SECURE 2.0 Act, there's now a special enhanced catch-up contribution for people specifically aged 60, 61, 62, or 63.

For 2026, this "super catch-up" limit is $11,250 instead of the standard $8,000.

So if you're in that 60-63 age window, your total possible employee contribution is:

$24,500 (base) + $11,250 (super catch-up) = $35,750

That's a serious acceleration opportunity right before the traditional retirement window.

Total Combined Limit (Employee + Employer)

The overall contribution limit — covering your contributions, your employer's match, and any after-tax contributions — is $72,000 in 2026.

For those 50 and older using the standard catch-up: up to $80,000. For those 60-63 using the super catch-up: the math works similarly.

This total cap (called the Section 415 limit) is what governs strategies like the Mega Backdoor Roth, which we'll cover later.

Quick Reference Table

Who You Are	2026 Employee Max	Total Limit
Under age 50	$24,500	$72,000
Age 50-59	$32,500 ($24,500 + $8,000)	$80,000
Age 60-63	$35,750 ($24,500 + $11,250)	$83,250
Age 64+	$32,500 ($24,500 + $8,000)	$80,000

New 2026 Roth Catch-Up Rule for High Earners

One important new rule hitting in 2026: if you're 50 or older and your FICA-taxable wages from that employer exceeded $145,000 in the prior year, your catch-up contributions must go into a Roth 401k (after-tax), not a Traditional 401k.

This is a SECURE 2.0 provision. Your employer needs to offer a Roth 401k option for this to work. If they don't, check with your HR — this is something plan sponsors need to address.

Traditional 401k vs. Roth 401k: Which Is Better in 2026?

This one trips everyone up. And honestly, most articles give you wishy-washy non-answers. I'll give you my actual opinion.

How They Work

Traditional 401k:

You contribute pre-tax dollars (reduces your taxable income today)
Money grows tax-deferred
You pay income taxes when you withdraw in retirement
Required Minimum Distributions (RMDs) start at age 73

Roth 401k:

You contribute after-tax dollars (no tax break today)
Money grows completely tax-free
Qualified withdrawals in retirement are 100% tax-free
No RMDs during your lifetime (thanks to SECURE 2.0)

The Decision Framework

Go Traditional 401k if:

You're in a high tax bracket right now (32% or 37%) and expect to be in a lower bracket in retirement
You're a high earner trying to reduce taxable income to qualify for other deductions or credits
You're an NRI or H1B worker planning to return to your home country (more on this later — the tax treaty situation matters)
You're older and retirement is close — you won't have decades for tax-free growth to compound

Go Roth 401k if:

You're early in your career, in a lower tax bracket (22% or under)
You believe tax rates will be higher in the future (reasonable bet)
You want tax diversification in retirement
You hate the idea of RMDs forcing withdrawals you don't need
You're in the FIRE community targeting early retirement — a Roth 401k feeds nicely into a Roth ladder strategy

My hot take: For most people in the 22-24% bracket, especially anyone under 40, the Roth 401k is the better default choice. You're paying taxes now when rates might be at generational lows, and then your money compounds completely tax-free for 20-30+ years. That's an enormous advantage.

For people in the 32%+ bracket, it's genuinely worth doing the math on Traditional. A tax break now at 32% that you reverse at 22% in retirement is a real arbitrage.

The hybrid approach: If you genuinely don't know where tax rates are headed (fair — none of us do), split it. Contribute some to Traditional, some to Roth. You get tax diversification. This is what a lot of advisors recommend, and I think it's reasonable if you can't decide.

IRA vs. 401k Roth: Don't Confuse Them

Your Roth 401k and a Roth IRA are different accounts with different rules. Roth IRA has income limits (phases out above $150,000 for single filers in 2026). Roth 401k has no income limits — anyone can use it regardless of income. That's a huge deal for high earners.

Employer Match: The #1 Financial Priority in Your Life

Full stop. Period. Nothing comes before this.

Before you pay down student loans. Before you max your IRA. Before you invest in taxable brokerage. Before you do anything else with your money — you capture your full employer match. Every. Single. Dollar.

Why Employer Match Is a Guaranteed 50-100% Return

Let's say your employer does a dollar-for-dollar match up to 4% of your salary. You make $100,000. You put in 4% = $4,000. Your employer puts in $4,000. That's a 100% instant return on your $4,000. No investment in the world gives you a guaranteed 100% return.

Even a 50-cent-on-the-dollar match up to 6% (the most common structure) gives you a 50% guaranteed return before the money even hits your account. That's better than any stock pick, real estate deal, or crypto play you'll find.

Common Employer Match Structures

Dollar-for-dollar match up to X% of salary: You contribute 5%, they match 5%. Simple and generous. Some employers do this up to 3%, 4%, or 5%.

50% match up to 6% of salary (most common): The classic structure. You contribute 6%, they contribute 3%. To get the full match, you must contribute at least 6%.

Tiered matching: Some employers do something like: 100% match on first 3% + 50% match on next 2%. You need to contribute 5% to get the full benefit.

Profit-sharing contributions: Some employers add a profit-sharing contribution on top of the match, often variable based on company performance. This can be a significant addition to the $72,000 total limit.

The trap: If you only contribute 3% when your employer matches up to 6%, you're leaving half the match on the table. Read your Summary Plan Description carefully and understand the exact formula.

Vesting Schedules — The Fine Print That Could Cost You

Here's the thing nobody reads until it's too late: employer match contributions often don't become fully yours on day one. That's vesting.

Immediate vesting: About 46% of plans offer this. The match is yours the moment it's deposited. Changing jobs? Take it all.

Cliff vesting: Nothing until a certain date, then 100% all at once. Common cliff schedules: 1-year or 3-year. If you leave before the cliff, you lose the entire unvested match. Leave one month before your 3-year cliff? $18,000 could vanish.

Graded vesting: You vest gradually over 2-6 years. A common schedule: 20% per year over 5 years. Leave at year 3? You keep 60% of the employer contributions.

What this means for you: If you're thinking about changing jobs, look at your vesting schedule first. Leaving a week before you hit a cliff or a grading milestone could cost you thousands. I've seen people hold off a job change for 2-3 months just to cross a vesting threshold. Smart move.

Your own contributions are always 100% vested immediately. The vesting schedule only applies to employer contributions.

How to Calculate Your Exact 401k Contribution Amount

People overthink this. Here's the simple math.

Step 1: Find the Match Threshold

Pull up your benefits documentation (or ask HR). Find out: what percentage of your salary do you need to contribute to get the maximum employer match?

Step 2: Calculate to Max the Match

If your employer matches 50% up to 6% of salary, you need to contribute at least 6% of your salary to get the full match. Do that first. Non-negotiable.

Step 3: Decide If You'll Max Out

Can you afford to max out at $24,500? If yes, here's your contribution percentage:

$100K salary: 24.5% to max out
$80K salary: 30.6% to max out
$150K salary: 16.3% to max out
$200K salary: 12.25% to max out

Step 4: Set a Per-Paycheck Target

Most plans let you set a dollar amount or percentage. Divide $24,500 by your number of pay periods:

26 biweekly paychecks: $942.31 per paycheck
24 semi-monthly paychecks: $1,020.83 per paycheck
12 monthly paychecks: $2,041.67 per paycheck

Watch Out for the "True-Up" Problem

Some employers only match per paycheck — they don't true-up at year end. If you front-load contributions (hit the limit early in the year), you might stop contributing partway through — and your employer stops matching too.

Example: You hit $24,500 by September. Your employer matched through September. But October through December? No contributions from you means no match from them. You just lost 3 months of match.

Check if your plan offers a year-end true-up. Many large employers do. If yours doesn't, spread your contributions evenly across all 26 (or 24 or 12) paychecks to capture the match every pay period.

Mid-Year Adjustments: Raise, Bonus, Job Change

Life doesn't stay static. Here's how to handle the common scenarios:

You Got a Raise

Recalculate your contribution percentage. If you were contributing a fixed dollar amount, your percentage actually dropped — and you might be leaving match money on the table if the match is percentage-based.

If you're contributing a percentage, you're probably fine. But check whether you want to increase it given the higher salary.

Pro move: Every time you get a raise, increase your 401k contribution by at least half the raise amount. Your take-home still goes up, but so does your retirement savings rate.

You're Not on Track to Max Out by December

It's February. You realize you've only set aside contributions to hit $15,000 by year end. Increase your contribution percentage now. Log into your plan portal — most plans let you change contribution amounts at any time.

You Got a Year-End Bonus

Check if your bonus is subject to 401k contributions. Many plans automatically deduct your contribution percentage from bonus checks. If yours does, a large bonus late in the year might cause you to hit the annual limit early and potentially miss out on employer match in December.

Plan ahead. You might want to temporarily lower your contribution rate in the months leading up to a bonus, then let the bonus contribution push you to the limit — making sure you still get the match right up to December.

Mega Backdoor Roth: The Advanced Strategy for High Earners

Honestly? This is one of the most powerful and underused strategies in personal finance. If your 401k plan allows it, this is a game-changer.

What Is It?

The Mega Backdoor Roth lets you contribute additional after-tax dollars to your 401k, then convert them to Roth — either within the plan (in-plan Roth conversion) or by rolling them to a Roth IRA when you leave.

In 2026, after you've maxed your $24,500 employee contribution and received employer contributions, you can potentially add after-tax contributions up to the $72,000 total cap.

So if your employer contributes $10,000, you can add up to $72,000 - $24,500 - $10,000 = $37,500 in after-tax contributions that can then be converted to Roth.

Why It's Powerful

You're essentially getting massive Roth exposure beyond the normal $24,500 limit. That money grows tax-free and comes out tax-free in retirement. For high earners who are phased out of Roth IRA contributions ($150,000+ for single filers), this is the primary way to build a large Roth balance.

Requirements

Your 401k plan must allow after-tax (non-Roth) contributions. Most plans don't.
Your plan must allow either in-service distributions or in-plan Roth conversions.
You need a plan administrator who handles the mechanics — it's not always seamless.

Tech company workers are in luck. Google, Microsoft, Amazon, Meta, Apple, Nvidia, and many other large tech employers offer plans that support this. If you work at one of these companies and aren't doing a Mega Backdoor Roth, check your plan documents today.

The Mechanics in Brief

Contribute after-tax dollars to your 401k (on top of your $24,500 pre-tax or Roth contributions)
As soon as possible, trigger an in-plan Roth conversion OR roll to a Roth IRA via an in-service distribution
You'll owe tax on any earnings between contribution and conversion — minimize this by converting quickly ("the pro-rata timing rule")
From that point on, the money grows tax-free forever

Note: This is a legitimate strategy explicitly allowed by the IRS. It's not a loophole or a gray area. Senator Ron Wyden has tried to kill it multiple times, but as of 2026 it remains fully legal.

Choosing 401k Investments: Index Funds vs. Everything Else

Most 401k plans offer somewhere between 10 and 30 investment options. Most of them are mediocre. A few are excellent. Here's how to navigate.

The Expense Ratio Is Everything

An expense ratio is the annual fee the fund charges, expressed as a percentage of your assets. This sounds trivial. It is not.

A fund with a 1.0% expense ratio versus a fund with 0.03% expense ratio might seem like a rounding error. Over 30 years, on $500,000, that difference costs you over $100,000 in foregone returns. This is math, not opinion.

Under 0.10% = excellent. Grab it. 0.10% - 0.20% = acceptable for specialized funds. 0.20% - 0.50% = starting to hurt. Over 0.50% = you're being fleeced. Avoid if possible.

Index Funds: The Default Answer

If your plan offers a total stock market index fund or S&P 500 index fund with a low expense ratio, that's your anchor holding. Vanguard, Fidelity, and Schwab index funds inside 401k plans often have expense ratios under 0.05%.

A simple three-fund portfolio works beautifully in a 401k:

US Total Market Index Fund (60-70% of your allocation)
International Index Fund (20-30%)
Bond Index Fund (0-20%, depending on your age and risk tolerance)

Target Date Funds: Decent, Not Perfect

Target date funds (like "Vanguard Target Retirement 2055") automatically shift from stocks to bonds as you approach retirement. They're simple, diversified, and fine for people who don't want to think about it.

But check the expense ratio. Some target date funds from lesser-known providers charge 0.5%+ inside a 401k. Compare to just holding the underlying index funds directly. If you can build a comparable allocation for less, do it.

Avoid: Actively managed mutual funds with high expense ratios. The overwhelming evidence shows that active managers don't consistently beat index funds after fees. You're paying more for worse outcomes.

My Portfolio Logic

If I were starting fresh in a 401k today, I'd do:

S&P 500 or Total Market index fund: 70%
International developed markets index fund: 20%
Bond index fund: 10% (increasing this as I approach retirement)

Simple. Low cost. Proven over decades.

The Bond Glide Path

Here's something most people don't think about until it's too late. As you get closer to retirement, you should be gradually shifting your allocation from stocks toward bonds. Not because bonds are better — they're not, in terms of long-run returns — but because volatility matters more when you're about to start withdrawing.

A classic rule of thumb is "110 minus your age" in stocks. So at 40, you'd hold 70% stocks. At 55, you'd hold 55% stocks. At 65, maybe 45% stocks.

That's a starting point, not a hard rule. Someone with a pension, Social Security, and low expenses can afford more stock exposure at 65 than someone who'll live entirely off their portfolio. But the directional logic is sound: reduce sequence-of-returns risk as retirement approaches.

Most target date funds automate this glide path. That's their biggest selling point.

Rebalancing in a 401k

One underappreciated advantage of a 401k over a taxable brokerage: rebalancing doesn't trigger taxes. When your stock allocation runs up from 70% to 80% after a bull market, you can sell stocks and buy bonds to rebalance back to your target — no capital gains tax. In a taxable account, that same move creates a taxable event.

Set a reminder to check your 401k allocation once a year. Many plans have automatic rebalancing features — use them.

401k Loans: When It's a Terrible Idea

The rule is: almost never take a 401k loan. Here's why.

How 401k Loans Work

Most plans let you borrow up to 50% of your vested balance or $50,000, whichever is less. You repay yourself with interest — typically prime rate plus 1%. Loan terms are usually 5 years (longer if for a primary home purchase).

Sounds not terrible, right? You're paying interest to yourself!

Why It Still Usually Stinks

Double taxation on repayment: You repay the loan with after-tax dollars. Then, when you withdraw in retirement, you pay taxes again. Those same dollars get taxed twice.

Lost compounding: The money you borrowed isn't invested. If markets go up while your money is sitting in "loan" status, you miss those gains permanently. A $25,000 loan during a bull market year can cost you $5,000-10,000 in foregone growth.

The job loss trap: If you leave your employer while a loan is outstanding, most plans require full repayment within 60-90 days. If you can't repay, the outstanding balance is treated as a distribution — meaning you owe income tax plus the 10% early withdrawal penalty if you're under 59½. A $25,000 loan suddenly becomes a $35,000 tax bill. I've seen people blindsided by this when they got laid off.

Contribution pause: Some plans require you to stop or reduce contributions while repaying a loan. You lose the match during that period.

When It Might Make Sense

Look, I'll be honest. If you're facing foreclosure or a genuine financial emergency and a 401k loan is the only alternative to taking an early withdrawal (with its 10% penalty), the loan is better. Also, short-term loans where the money will be repaid quickly can be relatively low-damage.

But for discretionary spending, car purchases, or anything non-urgent? Don't touch it.

The Real Cost: A Numbers Example

Say you take a $20,000 401k loan to pay for a kitchen remodel. You're 35 years old and your money would otherwise be invested, earning an average of 7% per year.

You repay the loan over 5 years. During those 5 years:

The $20,000 isn't invested — it's "owed to yourself"
Lost growth on $20,000 at 7% for 5 years is roughly $8,000 in foregone gains
You're also repaying with after-tax dollars, so you're effectively paying taxes twice on those repayments
If your plan suspended contributions during the loan, you also missed employer match for that period

Total real cost of that $20,000 loan: potentially $12,000 to $15,000 in combined lost growth, double taxation, and missed match. For a kitchen remodel. Take out a home equity loan instead — at least the interest might be deductible.

Early Withdrawal: The Double Whammy

This section is short because the answer is always the same: don't do it.

The 10% Penalty + Ordinary Income Tax

Withdraw from a Traditional 401k before age 59½ and you face:

Ordinary income tax on the full withdrawal amount
An additional 10% early withdrawal penalty

If you're in the 22% tax bracket and you withdraw $30,000, you owe $6,600 in income tax plus $3,000 in penalty. You walk away with $20,400. You just paid $9,600 to access your own money.

And that's before state income taxes.

Exceptions to the 10% Penalty

The IRS does carve out exceptions. The penalty doesn't apply if:

Age 55 rule: You separate from your employer in the year you turn 55 or later (50 for certain federal workers). You can take distributions without the 10% penalty, though you still owe income tax.
Disability: You're totally and permanently disabled.
Death: Distributions to beneficiaries.
Substantially Equal Periodic Payments (SEPP/72(t)): You take a series of substantially equal payments based on life expectancy. Complex, rigid, and if you mess up the schedule, the penalty applies retroactively for years.
Medical expenses: Unreimbursed medical expenses exceeding 7.5% of your adjusted gross income.
QDRO: Divorce-related transfers per a qualified domestic relations order.
Domestic abuse: Up to $10,000 or 50% of account balance (SECURE 2.0 addition).
Emergency personal expense: Up to $1,000 per year (SECURE 2.0 addition, one per year with conditions).
Birth or adoption: Up to $5,000 per parent per child.

Note: these exceptions waive the 10% penalty, but you still owe regular income tax on Traditional 401k withdrawals.

Rule of 55 vs. SEPP: Which One When?

If you're planning early retirement (FIRE community, this is for you), the Rule of 55 is simpler and more flexible — but it only works if you leave your job in the year you turn 55. SEPP/72(t) can be used at any age but locks you into a fixed schedule for at least 5 years or until age 59½, whichever is longer. Mess up one payment? Retroactive penalties on everything.

Changing Jobs: Roll It Over. Please. Don't Cash Out.

Every year, Americans cash out billions of dollars from 401k plans when they change jobs. This is one of the biggest wealth-destroying decisions in personal finance.

Your Options When You Leave a Job

Option 1: Leave it in the old employer's plan Fine short-term. But old plans may have limited investment options, higher fees, or just get forgotten. Not ideal long-term.

Option 2: Roll it to your new employer's 401k Good option if the new plan has good funds and low fees. Keeps everything consolidated.

Option 3: Roll it to an IRA Often the best option. You get access to essentially unlimited investment choices at Vanguard, Fidelity, or Schwab. Ultra-low expense ratios. Full control.

Option 4: Cash out (DON'T DO THIS) This is the Marcus-level mistake. You pay income tax plus the 10% penalty. You lose the tax-advantaged compounding forever. A $40,000 account at age 30 that compounds for 35 years could be worth over $400,000. Cashing out nets you maybe $28,000 after taxes and penalties. You just threw away $372,000.

How to Roll Over Correctly: Direct vs. Indirect

Direct rollover: The money moves directly from your old plan to your new IRA or 401k. You never touch it. No taxes withheld. The clean, correct way to do it.

Indirect rollover: The old plan sends you a check. They withhold 20% for taxes. You now have 60 days to deposit 100% of the original amount (including making up the withheld 20% out of pocket) into the new account. If you miss the 60 days or can't cover the withheld amount, it becomes a taxable distribution.

Always request a direct rollover. Always.

Vesting Reminder

Before you leave, check your vesting schedule. Your contributions: always yours. Employer contributions: only yours if vested. Plan your exit date accordingly.

401k vs. IRA: The Right Priority Order

People ask me this constantly. Here's the hierarchy I follow and recommend:

Step 1: 401k up to full employer match Non-negotiable. Guaranteed return. Do this first.

Step 2: Max out HSA (if eligible) If you have a high-deductible health plan, the HSA is the best tax-advantaged account that exists. Triple tax advantage: pre-tax contributions, tax-free growth, tax-free withdrawals for medical expenses. Fund this before your IRA.

Step 3: Max out Roth IRA ($7,500 in 2026 for under-50) More flexible than 401k (you can withdraw contributions penalty-free anytime). Better investment options. No RMDs. Do this if you're eligible based on income.

Step 4: Max out 401k to the full $24,500 Return to your 401k and push it all the way to the $24,500 limit.

Step 5: Taxable brokerage account After you've exhausted all tax-advantaged space, a regular brokerage account is your next move.

Step 6: Mega Backdoor Roth If your plan allows it and you still have investable dollars, pump after-tax contributions into the 401k and convert to Roth.

The 401k gets priority over an IRA in Step 1 specifically because of the employer match. After the match is captured, the Roth IRA often wins on flexibility. Then you come back to the 401k for the tax advantage on dollars 3-7.

Why This Order Matters More Than You Think

Let me put real numbers to this. Suppose you make $120,000 and you have $2,500/month to invest after your baseline expenses.

If you do the priority order correctly:

Step 1: $600/month to 401k to capture a 3% employer match = $3,600 from you + $3,600 employer match = $7,200 per year in your 401k
Step 3: $625/month to Roth IRA = $7,500/year
Step 4: $1,250/month back to 401k = $15,000/year additional

Total tax-advantaged: $22,500 from you + $3,600 employer match = $26,100 working for your retirement.

If instead you just dumped $2,500/month into a taxable brokerage and ignored the 401k match:

$30,000/year in taxable accounts
$0 employer match
No tax deduction, dividends taxed annually, capital gains taxed on sale

Same $2,500/month. Radically different outcomes in 30 years. The tax-advantaged route wins by hundreds of thousands of dollars. That's the order mattering in practice.

H1B Visa Holders and NRIs: What You Need to Know

This section is for you. I see this confusion constantly in NRI communities, and bad advice circulates widely. Let's set the record straight.

Should You Contribute to a 401k on an H1B?

Yes. Absolutely yes. As long as you're working in the US and paying FICA taxes, you can and should participate in your employer's 401k.

The employer match alone makes it worth it regardless of your plans. Free money is free money in any visa status.

What Happens When You Leave the US?

This is the key question. If you leave the US permanently and return to India (or another country), you have choices:

Option 1: Leave it in the 401k or roll to a US IRA The money continues to grow. You can withdraw at 59½ and pay US income tax at the applicable rate. As a non-resident at that point, you'd likely be subject to 30% withholding on distributions unless a tax treaty reduces it.

Option 2: Withdraw and take the tax hit If you're under 59½, you pay income tax plus the 10% penalty. However, if your marginal US income is low in the year you leave (say, you left the US partway through the year), your effective tax rate might be lower than normal.

Option 3: Roll to a Roth IRA and then execute a Roth ladder Complex but sometimes optimal for people with long-term US assets.

The India-US Tax Treaty

The US-India tax treaty exists but doesn't provide complete relief on 401k distributions. India taxes global income for tax residents. So 401k withdrawals might be taxed in both countries, with a foreign tax credit reducing (but not always eliminating) double taxation.

Get a cross-border tax advisor before you make any moves. This is not a DIY situation. The specific rules depend on your residency status, the treaty's specific provisions, and how both countries classify the income.

Social Security and H1B

You pay Social Security and Medicare taxes on your US income. If you've worked less than 40 quarters (10 years) in the US, you can't collect Social Security benefits. However, the US and India have a totalization agreement that might allow qualifying periods to be combined. Another area where specialized advice matters.

Traditional vs. Roth for NRIs Returning to India

Many H1B workers and NRIs are in the 22-24% US tax bracket. Upon return to India, they might be in a lower income tax bracket initially. This could make Traditional 401k contributions favorable (pay taxes later, potentially at lower rates in India) — but only if the treaty situation and Indian tax laws cooperate.

I'll say it plainly: for NRIs with an uncertain future in the US, capturing the employer match in a Traditional 401k is clearly the right move. The pre-tax reduction helps now, and the complexity of future tax treatment is a problem for later (with an advisor).

Roth 401k Consideration for NRIs

Some NRIs prefer Roth because the tax-free treatment is simpler — you've already paid US taxes, and depending on the country you return to, the Roth growth might be treated favorably (or at least more clearly). Clarity has value in cross-border situations.

Frequently Asked Questions

Q: Can I contribute to a 401k and an IRA in the same year?

Yes. These are completely separate contribution limits. You can max both — $24,500 in the 401k and $7,500 in a Roth or Traditional IRA (in 2026, for under-50). Just watch the Roth IRA income limit: single filers start phasing out above $150,000 MAGI in 2026.

Q: What if I have multiple jobs — can I contribute to both 401k plans?

The $24,500 limit is per person, not per employer. If you have two jobs and two 401k plans, your combined employee contributions across both plans cannot exceed $24,500. Employer contributions from each employer are separate and don't count against your personal limit.

Q: I'm self-employed. What's my equivalent?

A Solo 401k (Individual 401k). As a self-employed person, you can contribute both as "employee" (up to $24,500) and as "employer" (up to 25% of net self-employment income), with the total not exceeding $72,000 in 2026. This is an incredible vehicle for freelancers, consultants, and small business owners.

Q: Does my 401k contribution reduce my AGI?

Traditional 401k contributions reduce your W-2 taxable wages and your adjusted gross income. Roth 401k contributions do not reduce AGI. This matters for things like determining Roth IRA eligibility, student loan income-driven repayment amounts, and various income-based phase-outs.

Q: What's the deadline to contribute to a 401k for 2026?

December 31, 2026. Unlike IRAs (which give you until tax filing deadline), 401k contributions must be made through payroll during the calendar year. There's no way to contribute to a 401k after December 31 for the prior year. This is why you need to plan contribution timing throughout the year.

Q: My employer auto-enrolled me at 3%. Is that enough?

Almost certainly not. Auto-enrollment is designed to get people saving — not to optimize their retirement. Check what percentage is needed to capture the full employer match. Then check whether you can increase toward the $24,500 maximum. 3% default is better than nothing but leave it there and you're probably leaving match money on the table.

Q: Can I withdraw 401k money for a home purchase?

Not without penalty if you're under 59½, generally. A 401k doesn't have the same first-home exception that a Roth IRA does ($10,000 penalty-free lifetime withdrawal from a Roth IRA for first-time homebuyers). Some plans allow hardship withdrawals, but "I want to buy a house" rarely qualifies. Your better bet is a 401k loan if you must access the funds — but remember the risks detailed above.

Q: What's the difference between a 401k and a 403(b)?

Functionally very similar. 403(b) plans are offered by schools, nonprofits, hospitals, and some government employers. The contribution limits for 2026 are the same: $24,500 employee, $72,000 total. Some older 403(b) plans have annuity-heavy investment options with high fees — watch your expense ratios carefully.

Q: I'm late to saving for retirement. Am I screwed?

No. The catch-up contribution provisions exist precisely for people in this situation. If you're 50+ you can put in $32,500 per year. If you're 60-63, up to $35,750 per year. Combine that with Social Security (even if you haven't maximized it), any other savings, and possible downsizing of housing, and there's a path. It's harder, but not hopeless. Start aggressively now.

Q: What happens to my 401k if my company goes bankrupt?

Your 401k money is yours. It's held in a trust separate from the company's assets, protected under ERISA. If your employer goes bankrupt, the 401k assets are not available to creditors. The plan might be terminated, triggering a distribution — at which point you'd roll it to an IRA. The only exception is company stock inside the 401k (avoid holding large amounts of your own company's stock for exactly this reason).

The Bottom Line

Look, the 2026 limits are clear. $24,500 if you're under 50. $32,500 if you're 50-59 or 64+. $35,750 if you're the lucky 60-63 cohort. Total cap of $72,000 including employer contributions.

And the strategy hasn't changed:

Capture the full employer match first. No exceptions. This is step zero before anything else.
Decide Traditional or Roth based on your current vs. expected future tax rate. When in doubt, go Roth if you're young.
Push toward the $24,500 maximum as aggressively as your cash flow allows.
Don't cash out when you change jobs. Roll it to an IRA.
Watch the expense ratios. Index funds. Low fees. That's the game.
If eligible for Mega Backdoor Roth, use it. This is one of the most powerful wealth-building tools available to high earners.

Don't be Marcus. Don't leave free money on the table. Every dollar of employer match you don't capture is a dollar of compensation you earned and threw away.

Max it. Every year.

This post reflects 2026 IRS limits based on Notice 2025-67. For personalized tax advice — especially NRIs and H1B workers with complex cross-border situations — consult a qualified CPA or financial advisor who specializes in cross-border taxation.