Guides · Markets & investing
The 401(k) and the Free Money Problem
An employer match is the only guaranteed 50-100% instant return available to a normal person. A meaningful number of people leave it on the table every year, usually because nobody explained the mechanics.
Two limits, and they don't measure the same thing
The number people quote is the employee elective deferral limit — $24,500 for 2026. That's the cap on what comes out of your own paycheck.
Your employer's match does not count against it. Match money counts toward a separate, much larger cap on total annual additions from all sources, $72,000 for 2026. So maxing your deferral does not stop the match from arriving on top.
Catch-ups sit above the deferral limit for older workers: an extra $8,000 from age 50, and under SECURE 2.0 a larger 'super catch-up' of $11,250 for ages 60 to 63 specifically. That age band is genuinely a band — it does not continue at 64.
$24,500 is yours alone. $72,000 covers you plus employer. The match never eats into your limit.
Why the match beats every other return available
A common formula is 50% of the first 6% of pay. Contribute 6% and your employer adds 3% of salary — a 50% return on those dollars, credited immediately, before the money is invested in anything.
Nothing else in this entire app offers that. Not an index fund, not a factor tilt, not a bull market. A guaranteed 50% on day one is unavailable anywhere in public markets, which is why the match is the first call on savings after an emergency buffer.
The failure mode is quiet and common: contributing something, but less than the match threshold. Someone putting in 3% against a 6% formula isn't getting no match — they're getting exactly half the match available, and the shortfall never announces itself on any statement.
Vesting: whose money is it yet
Your own contributions are always 100% yours, immediately, in every plan. Vesting never applies to money that came out of your paycheck — that rule has no exceptions worth qualifying.
Employer money can carry a schedule. Cliff vesting means you own none of it until a date and then all of it at once; graded vesting hands it over in slices, commonly 20% a year. Leave before the schedule completes and the unvested portion goes back to the plan.
That's worth checking before resigning, because the timing is occasionally worth thousands and is entirely knowable in advance. It's one of the few pieces of financial planning where reading a single document tells you the exact number.
2026 limits: $24,500 employee deferral. A 50% match on the first 6% of pay is an instant 50% return on those dollars.