401(k) glossary

The §415(c) limit is the annual cap on total contributions to a participant's 401(k) from all sources combined — $72,000 for 2026, before catch-up contributions.

Unlike the 402(g) limit, which covers only your own deferrals, the §415(c) limit sweeps in employee deferrals, employer match, and profit sharing together. This is the number that matters for Solo 401(k) owners and anyone receiving generous employer contributions. In 2026 a saver could defer $24,500 themselves and still have up to $47,500 of employer money credited before hitting the $72,000 wall. Age-50 catch-up contributions are added above this limit, so an older saver's true ceiling is $72,000 plus their applicable catch-up amount.

Individual 401k Contribution Calculator

Auto-enrollment automatically signs eligible employees up to contribute a default percentage of pay to the 401(k) unless they actively opt out.

It reverses the usual inertia: instead of choosing to join, workers must choose to leave, which dramatically raises participation. A typical default starts around 3% to 6% of pay, often with automatic annual escalation that nudges the rate up one point a year toward 10% or more. Under SECURE 2.0, most newer 401(k) plans are required to auto-enroll new hires. You can always change your rate or opt out entirely, but a default set below the employer's match cap can quietly leave free money on the table.

401k Paycheck Calculator

A catch-up contribution is an extra amount savers aged 50 and older can add to their 401(k) above the standard deferral limit — $8,000 for 2026, or $11,250 at ages 60 to 63.

The catch-up exists to help people accelerate savings in their final working years. Layered on top of the $24,500 elective-deferral limit, the standard $8,000 catch-up lets a 50-year-old defer up to $32,500 of their own pay in 2026. Under SECURE 2.0 an enhanced catch-up of $11,250 applies during the years you are aged 60 through 63, pushing the personal limit to $35,750, before it reverts to the standard amount at 64. Higher earners may be required to make their catch-up contributions on a Roth basis.

401k Max Contribution Calculator

The compensation limit is the maximum annual pay that can be counted when calculating 401(k) contributions and employer matches — $360,000 for 2026.

The IRS caps how much of a high earner's salary a plan may recognise, so an executive making $500,000 has their match and profit-sharing contributions figured on $360,000, not the full amount. For a plan matching 50% up to 6% of pay, that ceiling limits the match to $10,800 no matter how much more the person earns. The limit prevents plans from funnelling disproportionate contributions to top earners and interacts with the nondiscrimination tests that Safe Harbor designs are built to pass automatically.

Individual 401k Contribution Calculator

The 402(g) limit is the maximum an employee can contribute to a 401(k) from their own pay in a year — $24,500 for 2026, across traditional and Roth combined.

This ceiling applies to your elective deferrals only; the employer match and profit sharing sit on top under the separate, higher §415(c) limit. It is a per-person limit, not per-plan, so someone contributing to two 401(k)s in the same year must keep the total under $24,500. Exceeding it creates an excess deferral that must be withdrawn by April 15 to avoid double taxation. Savers aged 50 and older can add a catch-up contribution above this figure, raising their personal deferral room substantially.

401k Max Contribution Calculator

An elective deferral is the portion of your own paycheck you choose to contribute to your 401(k), deducted automatically each pay period before it reaches your bank account.

Deferrals are what you put in yourself, as opposed to employer match or profit-sharing dollars. You set them as a percentage of pay or a fixed amount, and payroll routes the money straight into the plan. In 2026 your combined traditional and Roth deferrals cannot exceed $24,500 (the 402(g) limit), before any age-based catch-up. Because traditional deferrals come out pre-tax, a $200 deferral in a 24% marginal bracket reduces take-home pay by only about $152 — the tax you would otherwise have paid covers the rest.

401k Paycheck Calculator

A 401(k) loan lets you borrow from your own retirement balance and repay it with interest through payroll deductions, avoiding taxes and penalties if repaid on schedule.

Plans that permit loans generally cap them at the lesser of $50,000 or 50% of your vested balance, repaid over up to five years (longer for a home purchase). The interest you pay goes back into your own account, not to a bank, and no tax or penalty applies while the loan is current. The danger is separation from work: leaving your job often makes the outstanding balance due quickly, and an unpaid balance is treated as a taxable distribution plus the 10% penalty if you are under 59½. Borrowed funds also miss out on market growth while they are out.

401k Withdrawal Penalty Calculator

The early withdrawal penalty is an extra 10% tax the IRS charges on money taken from a 401(k) before age 59½, on top of ordinary income tax.

Authorised by Code section 72(t), the penalty is designed to keep retirement savings locked away. On a $20,000 early withdrawal in the 22% federal bracket with 5% state tax, you lose $2,000 to the penalty plus $5,400 in income tax, keeping only $12,600 — and the money stops compounding for retirement. Several exceptions waive the 10%, including total disability, certain medical expenses, a qualifying birth or adoption, and separation from service at 55 or older under the Rule of 55. The ordinary income tax still applies even when an exception removes the penalty.

401k Withdrawal Penalty Calculator

A hardship withdrawal is an early distribution a 401(k) plan may allow for an immediate and heavy financial need, such as medical bills, avoiding eviction, or funeral costs.

It lets you access money you otherwise could not touch before 59½, but it is expensive: the amount is taxable as ordinary income and, unless a §72(t) exception applies, still carries the 10% early-withdrawal penalty. Unlike a 401(k) loan, a hardship withdrawal cannot be paid back, permanently shrinking your retirement balance and its future growth. Plans limit the amount to what the need requires plus taxes, and require documentation. Because of the lasting cost, financial planners treat it as a last resort after emergency savings and other options are exhausted.

401k Withdrawal Penalty Calculator

A Qualified Domestic Relations Order (QDRO) is a court order that divides a 401(k) between spouses in a divorce, letting a portion be assigned to the ex-spouse without triggering tax or penalty.

A 401(k) is often a couple's largest asset, but you cannot simply hand part of it over — the plan can only release funds to a former spouse under a QDRO approved by both the court and the plan administrator. The order specifies the amount or percentage the alternate payee receives. Money transferred under a valid QDRO avoids the 10% early-withdrawal penalty, and the receiving ex-spouse can roll it into their own IRA or 401(k) to keep it tax-deferred, or take a penalty-free (though taxable) distribution. Getting the order drafted correctly is essential to preserving these protections.

401k Divorce Calculator

A Required Minimum Distribution (RMD) is the amount the IRS forces you to withdraw from a traditional 401(k) each year once you reach the required starting age.

The government lets 401(k) money grow untaxed for decades, then requires you to start drawing it down so it can finally be taxed. RMDs begin at age 73 for most people, or 75 if you were born in 1960 or later. The amount equals your prior-year-end balance divided by a life-expectancy divisor from the IRS Uniform Lifetime Table — at 73 the divisor is 26.5, so a $500,000 balance requires about $18,868. Missing an RMD triggers a steep excise tax. Roth 401(k)s no longer require lifetime RMDs for the original owner.

401k RMD Calculator

The Rule of 55 lets you take penalty-free withdrawals from your current employer's 401(k) if you leave that job in or after the calendar year you turn 55.

It is an exception to the 10% early-withdrawal penalty that normally applies before age 59½. The catch is that it covers only the plan of the employer you just left — money in old 401(k)s or IRAs is not eligible, and rolling this balance into an IRA forfeits the benefit. Withdrawals remain fully taxable as ordinary income; the rule waives the penalty, not the tax. For public-safety workers the threshold is age 50. It gives early retirees a bridge to age 59½ without the penalty, provided they leave the funds in the workplace plan.

401k Withdrawal Penalty Calculator

The Uniform Lifetime Table is the IRS chart of life-expectancy divisors used to calculate Required Minimum Distributions for most retirement account owners.

Each age maps to a divisor, and your RMD is your prior-year-end balance divided by that number. The divisor shrinks as you get older, so the required percentage of your balance rises over time: at age 73 the divisor is 26.5 (about 3.8% of the balance), falling steadily in later years to force larger withdrawals. On a $500,000 balance, the age-73 divisor produces an RMD of roughly $18,868. A separate table applies if your sole beneficiary is a spouse more than ten years younger, giving a smaller required withdrawal.

401k RMD Calculator