12 Most Common Employee 401(k) Questions

Most employees don’t fully understand how their 401(k) works. This guide answers the most common 401(k) questions for 2026 – from contribution limits and employer matching to fees, vesting, Roth options, and withdrawals – so you can avoid costly mistakes and make smarter decisions with your retirement savings.

#1 How Much Can I Contribute in 2026?

For 2026, the employee elective-deferral limit is $24,500. This limit applies to 401(k)s, 403(b)s, most 457 plans, and the federal Thrift Savings Plan.

If you’re age 50 or older, you can make an additional $8,000 catch-up contribution, bringing your total to $32,500.

For those ages 60, 61, 62, and 63, the super catch-up contribution is $11,250. That means you can contribute up to $35,750 in total in 2026.[1]

#2 How Much Should I Contribute?

A commonly recommended starting point is 10% of your pay each pay period. 

That said, the right amount is ultimately what you can afford to contribute consistently while still meeting other financial priorities.

Before maxing out your 401(k), make sure you have adequate emergency savings and short-term reserves. 

The goal is to avoid borrowing – or withdrawing – from your retirement money before you retire.

At a minimum, try to contribute at least enough to capture your full employer match. 

Also remember: You’re not locked into one contribution rate for the entire year. 

You can adjust your deferrals as needed.

#3 How Is My Money Invested?

It’s common for employers to auto-enroll new employees in the employer-sponsored 401(k) plan.

While this typically means more people have 401(k)s, it also means most people are auto-enrolled using the default investment option.

This new way of enrolling plan participants could cost you in the long run because you may be tossed into a target date fund (TDF) that may not align with your goals or risk tolerance.

In addition, TDFs often underperform in good markets and do a poor job of managing downside risk during tough markets.

If you want to maximize your retirement savings, your money should work for you. 

And should be invested based on your goals, your risk tolerance, and when you will need access to your funds. 

Be sure to ask how your money is invested.

#4 What Fees Are Associated with the Default Investment Option? 

If you aren’t careful, high fees can eat away at your retirement savings. 

The first thing is that 401(k) fees fall into 3 basic categories: Investment fees, plan administration fees, and individual service fees. 

• Investment fees make up the largest portion of 401(k) fees and include the cost of investment management and other investment-related services. They are generally charged as a percentage of assets.
  
• Plan administration fees cover general management, such as record-keeping, accounting, legal, and trustee services.
  
• Service fees are like additional administrative fees. They cover features that you opt into, like taking out a 401(k) loan, rolling 401(k) investments over to an IRA, or seeking financial advisory services.

You can’t just make these fees disappear, but you do have some options.

You won’t get rid of administrative fees. If they are in your plan, they are there, and there’s most likely nothing you can do about them. 

But each of the investment options inside your plan have different fees, and you can switch investment options as the plan allows. 

For example, an S&P 500 index fund may have a fee around .02% compared to a target date fund at .7%, which is a significant difference.

Fees are laid out in your statements.

This is why we recommend you get your statements, read them, and know this information.

[Related: How to Read a 401(k) Statement and Understand It]

#5 When Can I Change My Investment Options?

If you discover that you are auto-enrolled in a target date fund or a fund that doesn’t fit your needs and goals, you need to know the rules of your 401(k) plan to determine what you can do.

That requires you to contact HR or your plan administrator to find out how to change your investment options.  

Don’t wait to find out the answer. 

You want to be able to make the necessary changes as soon as possible. 

Here’s why: If you’re a conservative investor and you’ve been put in a pretty aggressive fund and the market moves against you, you may lose money rather quickly. 

If you’re an aggressive investor and you’ve been put mainly in bonds, and then stocks take off, you may miss out on opportunity costs.

#6 Is There a Roth 401(k) Option? 

The Roth plan option is a type of 401(k) you fund, just like a traditional 401(k), but it has different tax benefits.

The key difference is you receive a tax break today if you contribute to the traditional 401(k) each year. 

With the Roth 401(k), you lose the opportunity of a tax break upfront since your contributions are made with after-tax dollars. But your earnings are tax-free in retirement. 

With a Roth 401(k), you must wait until the future to enjoy tax benefits. 

Thanks to the Secure Act 2.0, there are more benefits to the Roth provision. 

Employee plan sponsors can create emergency savings accounts for participants to contribute to a separate emergency savings account that’s part of the 401(k) plan. 

And in 2026, those earning over $150,000 in 2025 FICA wages – that is income subject to Social Security and Medicare taxes – any catch-up contributions you make must go into a Roth 401(k).

Also, if you leave the company, the funds can be converted into a Roth investment account or withdrawn because your contributions are always yours to keep.

[Related Read: Should I Consider the Roth 401(k)?]

#7 What Type of Contributions Should I Make? 

This is a personal decision and depends on your goals and financial situation. 

And it also depends on if your employer offers the Roth 401(k) option. 

Some people need a tax break today and contribute to a traditional 401(k), while others aren’t concerned with it and would rather have their retirement totally tax-free via the Roth 401(k).

[Related Read: Pros and Cons of a Roth 401(k): Key Differences and Tax Implications]

#8 Does My Employer Provide Matching Contributions? 

The 401(k) company match is basically free money for your future, which is why you want to know ASAP if your employer matches contributions and what the rules are.

Many employers match a percentage of employee contributions up to a certain portion of the total salary. 

Some match employee contributions up to a certain dollar amount.

It’s up to you to find out your plan rules regarding the employer match. 

If you don’t know, call HR or your plan representative. 

Then, do what you can to contribute at least enough to your 401(k) to reach the match amount.

#9 What Is My 401(k) Vesting Schedule?

Vesting schedules prevent 401(k) investors who don’t stay long at a company from taking their employer-matching retirement contributions with them when they change jobs. 

The free money you received through your company match may not be yours to keep and can be taken back if you leave before you’re fully vested. 

401(k) vesting rules vary from employer to employer, and there are 3 types of vesting schedules:

• An immediate vesting schedule means you own your employer’s matching contribution as soon as you receive it in your 401(k) account.  
• A graded vesting schedule means you vest a certain percentage of your employer’s matching dollars in a set period of time until you are 100% vested. For example, 20% might be vested after your first year working, 40% vested the second year, etc. 

  By law, employers must vest employees at least 20% at the end of 2 years, and another 20% annually each year thereafter. This means by the end of year 6 of working for your company you will be 100% vested for the company match.

• Cliff vesting occurs when a company requires employees to stay employed for a specific amount of time before the money their employer contributed becomes theirs. Employers have up to 3 years to vest employees in this type of vesting schedule. 

#10 Should I Roll Over My Old 401(k)s or Not? 

Here are the options for 401(k)s when you change jobs:

1. Leave the money behind in the former employer’s 401(k) plan. We don’t recommend it, but it is an option.
   
2. Roll over the 401(k) savings into an individual retirement account (IRA). This option allows you to consolidate more than one 401(k) account into an IRA.
   
3. Roll over the old 401(k) into a new 401(k) account if permitted by your new employer. If you have at least $5,000 saved in your old 401(k), most companies allow you to roll the 401(k) over.
   
4. Cash out your 401(k). While this is an option, you will face penalties and pay taxes for cashing out before age 59½.

Each choice has its own set of considerations regarding taxes, investment options, and fees.

We feel it’s critical to understand the rules before you make the move. 

[Related Read: 401(k) Rollover Mistakes to Avoid]

#11 Is It a Bad Idea to Borrow from My 401(k)?

Borrowing from your 401(k) seems appealing because 401(k) loans require you to pay interest to yourself rather than a creditor.

With a 401(k) loan, you can borrow as much as your 401(k) plan allows as long as the funds are paid back within 5 years.

However, there are other considerations.

Some 401(k) plans do not allow you to contribute to your 401(k) plan while you have a 401(k) loan, which means you cannot grow your nest egg.

If you fail to pay back the 401(k) loan, the loan may go into default and be converted to an early withdrawal.

Early withdrawals are also costly.

Even if you are tempted to take an early withdrawal from your 401(k), consider the penalties.

[Related Read: 401(k) Early Withdrawals May Cost You More Than You Think]

The IRS requires automatic withholding of 20% of a 401(k) early withdrawal for taxes.

In addition to withholding taxes, the IRS will also penalize you with a 10% penalty on all funds withdrawn when you file your tax return if you’re under the age of 59½.

That’s not all. 

The amount withdrawn is taxed as ordinary income for the year the money was taken out – which could push you into a higher tax bracket, and you’ll be forced to pay even more taxes.

Should you take money from your 401(k) early – whether it’s a 401(k) loan or withdrawal – you miss out on the compounding effect and the potential growth. 

As a result, taking money from your 401(k) before retirement may significantly impact your retirement savings over time.

#12 How Do I Get Help to Maximize My 401(k)?

It may be well worth your time to get third-party advice – especially when it comes to something as important as your retirement future.

401(k) Maneuver provides professional account management with the goal to help you grow and protect your 401(k).

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that harm your account performance. 

There are no time-consuming in-person meetings and nothing new to learn, and you don’t have to move your account. 

Simply connect your account to our secure platform, and we regularly review and  rebalance your account for you, when necessary. Check here for more info on how it works. 

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) Strategy Session with one of our advisors.

Book a Strategy Session

Sources

[1] Internal Revenue Service (IRS). 401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500. IRS News Release, Notice 2025-67, published November 13, 2025.

https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500

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