When You Should and Shouldn't Max Out Your 401(k)

Is maxing out your 401(k) a good idea?

By Matthew Frankel, CFP – Updated Dec 11, 2025 at 2:19 PM EST

Key Points

The 2026 401(k) contribution limit is $24,500; $32,500 if aged 50+ with catch-up contributions.
Max out your 401(k) if stable, no high-interest debt, and an emergency fund is in place.
Explore IRAs or HSAs for further investing after hitting 401(k) limits or for better tax benefits.

A 401(k) is an employer-provided retirement account you can contribute to with pre-tax dollars.

In 2026, you can contribute a maximum of $24,500 (up from $23,500 in 2025) to your 401(k) if you are younger than 50. If you're 50 or older, you become eligible to make additional catch-up contributions valued at $8,000 (up from $7,500 in 2025). That means you can contribute a total of $32,500 (up from $31,000 in 2025). These limits can change annually, and they do not include any matching funds your employer provides.

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An infographic explaining four scenarios in which you should max out your 401(k) plan. — Image source: The Motley Fool

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Consider These Steps if Your 401(k) Is Losing Value

If your 401(k) is going in the wrong direction, learn what to do.

Rules for 403(b) Withdrawals in 2026

When it's time to take money out of your 403(b) plan, here are some best practices for distributions.

403(b) Retirement Plans for Teachers & Non-Profit Employees

Here's a brief overview of 403(b) retirement plans, including their pros, cons, and contribution limits.

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FAQ: Maxing Out Your 401(k)

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

TMFMattFrankel

@MattFrankelCFP

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You are financially stable: It makes little sense to put thousands of dollars into a 401(k) if you're struggling to accomplish basic financial tasks such as paying your bills on time or keeping a roof over your head and food on the table.
You don't have high-interest debt: Your 401(k) returns will rarely, if ever, exceed the interest rate you'd pay on credit cards or payday loans. If you have debt with an interest rate of around 10% or higher, you should generally contribute only enough money to your 401(k) to earn your maximum employer match. Then focus on paying down your debt with your extra money.
You have an emergency fund: You need liquid cash accessible for emergencies to avoid ending up in debt when you face unexpected expenses. You do not want to be forced to withdraw funds from a 401(k) to cover emergencies, especially since you could face penalties for withdrawing funds before age 59 1/2 or you could be forced to sell 401(k) investments at an inopportune time. Save up at least a small emergency fund before contributing anything to your 401(k) and then contribute enough to earn the maximum employer match.
You have considered other types of tax-advantaged accounts: Rather than devoting all your retirement money to maxing out your 401(k), you should consider whether some of your funds should go into a traditional or Roth IRA or a health savings account. These accounts can offer different tax benefits and, in some cases, provide more flexibility in the types of assets you invest in.

If you have the money to max out your 401(k) and have considered the opportunity costs of using your funds for this instead of other financial goals, then spending the money to maximize this tax-advantaged retirement account can make sense.

You'll benefit from the ease of contributing directly via your paycheck and from the tax breaks a 401(k) provides. Having most or all of your retirement money in one place can make it easier to monitor your portfolio and ensure you maintain the proper asset allocation.

When You Should and Shouldn't Max Out Your 401(k)

Is maxing out your 401(k) a good idea?

Key Points

Consider These Steps if Your 401(k) Is Losing Value

Rules for 403(b) Withdrawals in 2026

403(b) Retirement Plans for Teachers & Non-Profit Employees

FAQ: Maxing Out Your 401(k)

About the Author

Our Guides

Premium Investing Services

Consider These Steps if Your 401(k) Is Losing Value

Rules for 403(b) Withdrawals in 2026

403(b) Retirement Plans for Teachers & Non-Profit Employees

FAQ: Maxing Out Your 401(k)

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