401(k) Plans: Contributions, Matches, Fees, and Withdrawals

A 401(k) provides a workplace account structure. The plan may offer pre-tax elective deferrals, designated Roth contributions, or both. Pre-tax deferrals generally reduce current taxable income and are generally taxed when distributed; designated Roth contributions are included in current income and can be tax-free when distribution requirements are met.

Participants still need to select investments from the plan menu. Asset allocation, diversification, fund expenses, and behavior determine how the invested balance experiences market risk.

The employee elective-deferral limit is $24,500 for 2026. The general catch-up limit is $8,000 for eligible participants age 50 or older, while eligible participants ages 60 through 63 have a higher $11,250 catch-up limit. These are employee deferral limits; other overall plan limits also exist.

An employer match is plan-specific. Review the matching formula, contribution timing, true-up rules, and vesting schedule. Employee salary deferrals are always fully vested, while employer contributions may vest over time under the plan.

Plan administration fees and investment expenses reduce the participant’s account value. Compare expense ratios, administrative charges, advisory services, and whether a lower-cost share class or index option is available.

A long list of funds does not guarantee a well-designed menu. A participant can often build a diversified allocation with a small number of broad options, but the appropriate allocation depends on the plan, goal, horizon, and risk capacity.

After employment ends, options may include leaving money in the plan, moving it to a new employer plan, completing a rollover to an IRA, or taking a distribution. Taxes, fees, investment access, creditor protections, and early-withdrawal exceptions can differ.

A rollover can also affect access under the Rule of 55. Evaluate distribution rules before moving money, rather than treating consolidation as automatically preferable.