New 2026 401(k) Limits, Same Old Mistakes

☕ Good morning SenseMakers!

I talked with three executives last week. All three make north of $400K. All three have good company retirement plans. And all three are leaving somewhere between $40K and $120K on the table this year.

Not because they're lazy. Not because they don't care. But because no one ever explained their options in a way that actually makes sense.

One VP assumed his default election was optimal. It wasn't. Another thought the Roth option didn't apply to high earners. Wrong. The third didn't realize her plan had a separate 457(b) limit she could stack on top of her 403(b). Six figures, gone.

Here's the thing: your company didn't design the plan for you specifically. They designed it for broad adoption, administrative ease, and maybe maximum owner savings. Your job is to figure out which lane you're in, then optimize your strategy within that system.

Today, we're fixing that. By the end of this article, you'll know how to hit the new 2026 limits without scrambling in Q4, protect your match, and build real tax diversification using a simple per-paycheck framework.

🎯 The Real Strategy Is the Schedule

The 2026 elective deferral limit for 401(k), 403(b), and governmental 457(b) plans is $24,500. If you're 50 or older, add $8,000 in catch-up for a total of $32,500. And if you're between 60 and 63, you get an even higher catch-up of $11,250, bringing your total to $35,750.

Those numbers matter, but they're not the strategy. The strategy is turning those limits into a schedule that runs on autopilot.

Most people set a high percentage in January, hit the max by August, then wonder why their December paycheck feels off or why they missed match dollars in Q4. That's the match trap, and it costs real money.

Here's the move: calculate your per-paycheck target based on your actual pay frequency, then set it and forget it.

If you're paid twice a month (24 paychecks), $24,500 divided by 24 is about $1,021 per paycheck. If you're paid biweekly (26 paychecks), it's about $942 per paycheck. Add the catch-up if you're 50 plus: $32,500 divided by 24 is roughly $1,354 per paycheck. If you're in that 60 to 63 sweet spot, $35,750 divided by 24 is about $1,490 per paycheck.

One adjustment in January, and you're done. No scrambling. No regret. Just consistent execution across the full year.

📍 Don't Step on the Match Trap

Here's where good intentions blow up: if you max your contributions too early and your plan doesn't offer true-up matching, you can miss free money later in the year.

Let's say your company matches 50% of the first 6% you contribute. You front-load contributions and hit the $24,500 cap by September. Come October, November, and December, you're contributing zero. If your plan doesn't true up the match, your employer isn't matching anything in Q4 either. You just left three months of free money on the table.

Bonus checks make this worse. If you get a large bonus and your deferral percentage applies to it, you could accidentally blow through your annual limit in one check, cutting off contributions and match for the rest of the year.

Two questions to answer right now: Does your plan offer true-up match? Is match applied to bonus compensation, and do you have a separate bonus deferral election?

If there's no true-up, spread your contributions evenly across all paychecks. If you get bonuses, adjust your bonus deferral rate so you still capture match and finish near the annual max without maxing early. This is planning, not guessing.

💰 Lanes First, Products Second

Your company retirement plan wasn't built for you. It was built for your company's priorities. But once you know which lane you're in, you can optimize the features that matter most.

401(k) lane: Most private sector folks are here. Pre-tax contributions lower your tax bill today. Roth contributions grow tax-free forever. Most plans let you split between both, and you should. That's how you build tax diversification for your future self.

Here's the move most people miss: the mega backdoor Roth. If your plan allows after-tax contributions with in-plan Roth conversions, you can push way more into Roth accounts than the standard $24,500 limit. The total annual additions limit for 2026 is $72,000. Not every plan allows this, so check your summary plan description. But if yours does, it's a massive tax advantage.

Another gem: the Rule of 55. If you separate from your employer in or after the year you turn 55, you can access your 401(k) money without the 10% early withdrawal penalty. This is huge if you're planning hybrid retirement, where you're generating income from flexible work but also living off savings penalty-free.

And one more recent win: Roth accounts within employer plans no longer have required minimum distributions while you're alive. That means more control over your retirement income strategy and potentially more wealth you can pass on.

403(b) lane: If you work for a school, hospital, or nonprofit, the 403(b) is your parallel to the 401(k). Same deferral limits, usually a Roth option. But there's a unique twist: the 15-year service catch-up. If your plan includes it and you qualify, you might get up to $3,000 extra per year with a $15,000 lifetime cap. Most people don't even know this exists.

The Rule of 55 can apply here too, depending on your plan. And make sure you understand whether your plan is ERISA-covered. That changes fiduciary responsibilities and oversight, which affects how your plan is managed and protected.

457(b) lane: Governmental 457(b) plans are incredible because they have a separate deferral limit from your 401(k) or 403(b). That means you can save into both buckets. Double the tax-advantaged space. And distributions from a governmental 457(b) aren't subject to the 10% early withdrawal penalty, unlike 401(k) and IRA rules.

There's also a special three-year catch-up provision that can be powerful for late-stage savers, though you generally can't use the age 50 catch-up and the special 457 catch-up in the same year. Coordinate carefully.

Non-governmental 457(b) plans are a different animal. They're typically unfunded, restricted to selective management, and your deferred comp could be at risk if your employer goes under. Read the documents carefully. This is not a 401(k).

⏱️ 2026 Rule Shifts Worth Noticing

A few things changed recently that affect how you approach contributions this year.

Automatic enrollment is now required for most newly established 401(k) and 403(b) plans beginning with the 2025 plan year. If you're an employer, set the default high enough to capture the match and let it escalate automatically. If you're an employee, verify your current settings.

Long-term part-time eligibility expanded in 2025. The service period dropped from three years to two years for the 500-hour rule in many ERISA-covered plans. If you have part-time employees or you are one, this matters.

Roth catch-up for high earners is evolving. Notice 2025-67 sets the wage threshold for 2026 catch-up Roth designation at $150,000 of prior-year wages. The IRS final regulations say the Roth catch-up requirement generally applies for taxable years beginning after December 31, 2026, with flexibility for earlier good-faith implementation. The takeaway: verify how your specific plan is handling catch-up contributions this year. Don't assume.

Want the full breakdown? I recorded a complete field guide walking through every lane, every feature, and the exact framework for optimizing your company retirement plan. Watch it here:

✅ The 10-Minute Play: What to Do This Week

Here's your checklist. Do this now, not in November.

1. Identify your lane: 401(k), 403(b), governmental 457(b), or multiple.

2. Pull your pay frequency and paychecks remaining in 2026.

3. Set your deferral based on the per-paycheck target we calculated earlier.

4. Confirm match rules and whether your plan offers true-up.

5. If you're 50 plus, confirm catch-up settings and whether your plan is treating catch-up as Roth based on your prior-year wages.

6. If you're in the public sector, confirm whether you have a governmental 457(b) and coordinate both limits.

7. Choose a simple investment approach. If your plan's lineup feels overwhelming, pick a target-date fund or managed model that matches your time horizon.

One payroll change now means fewer surprises later. For more on asset location strategy and how to optimize where you hold different investments, we've covered that in depth.

🔄 Keep the System Alive

Setting the contribution once isn't enough. Life changes. Income changes. Your plan should change with it.

Next time you get a raise, increase your deferral percentage by 1% or 2%. You won't feel the difference in your paycheck, but your future self will thank you. If you get a promotion or a bonus structure shifts, revisit your per-paycheck math. And if you change employers mid-year, recalculate immediately based on paychecks remaining at your new company.

This isn't set it and forget it forever. It's set it, then maintain it.

🧠 Making Sense of Your Money on Retirement Plans

Before: Vague plan documents you promised to read. A default election you set three years ago. Confusion about match, Roth, and whether you're leaving money on the table. Stress every December wondering if you maxed correctly.

After: A clear per-paycheck target tied to your pay frequency. Confidence that you're capturing every match dollar. Tax diversification through pre-tax and Roth contributions. A system that runs on autopilot while you focus on your career and family.

At Tailored Wealth, this is what we do. We build professional-grade financial operating systems using advanced planning technology that connects everything: cash flow modeling, tax projections, equity strategies, and retirement plan optimization for hybrid retirement scenarios.

We're the partner who keeps the system updated and in motion. We sit between you and the complexity. We translate your life goals into clear strategies, like maximizing your equity compensation or building withdrawal strategies that protect you from forced selling in a downturn.

And we give you a system that works even when you're busy running your business or leading your team.

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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