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A 401(k) is a retirement account at work. Money comes out of your paycheck before you see it, and many employers add a match. Here are the 2026 IRS rules in plain English.
A common formula is 50% of what you put in, up to 6% of pay. On $60,000 pay, putting in 6% ($3,600.00) brings $1,800.00 from your employer. Putting in 3% brings $900.00. Try your plan's formula.
Your own paycheck money is always 100% yours. Employer money can follow a schedule. IRS examples: 100% after 3 years (cliff), or 20% after 2 years rising to 100% after 6 (graded). Leave early and you can lose the part that isn't vested (IRS vesting). Safe harbor contributions vest right away (IRS 401(k) overview).
At 50 or older you can add $8,000 in 2026. If you turn 60, 61, 62 or 63 in 2026, the limit is $11,250 instead. From 2026, if your wages from that employer were over $150,000 in 2025, catch-up money must go in as Roth in plans that offer Roth (IRS catch-up, Notice 2025-67).
You + your employer together can put in up to $72,000 in 2026, or 100% of your pay if less. Catch-up money is on top: up to $80,000, or $83,250 at ages 60 to 63. Only the first $360,000 of pay counts (IRS 401(k) limits).
Plans don't have to offer loans. If yours does, all your loans together can't be more than half your vested balance (or $10,000 if that's more) and never more than $50,000, minus how much your loan balance dropped in the last 12 months (IRS loan FAQ).
You generally repay within 5 years, in equal payments at least every 3 months; a loan to buy your main home can run longer. Miss payments and the unpaid balance becomes a taxable withdrawal, plus the 10% early tax if it applies. Leave your job with a loan, and the plan may take it from your account; you have until your tax return due date, with extensions, to roll that amount over (IRS loan FAQ).
Plans may allow them for an immediate and heavy need, only up to the amount you need. The IRS safe-harbor list: medical bills, buying your main home, college costs for the next 12 months, stopping eviction or foreclosure, funeral costs, and some home repairs. The money is taxed, and the 10% early tax may apply (IRS hardship).
A direct rollover to an IRA or your new plan avoids tax and the 20% withholding (rollover guide, IRS rollovers). Taking money out before 59½ usually adds a 10% tax, but not if you leave your job in or after the year you turn 55 (IRS early distributions).
| IRS example | IRS says | This calculator |
|---|---|---|
| IRS FAQ: Participant A, $100,000 vested, borrowed $40,000, owes $33,322 | $10,000 | $10,000.00 |
| IRS FAQ: Jim, $80,000 vested, borrowed $27,000, owes $18,000 | $22,000 | $22,000.00 |
| IRS FAQ: Jim, if he first pays off the $18,000 | $23,000 | $23,000.00 |
Source: IRS: Retirement plan FAQs regarding loans (limit, 5 years, default, offsets, worked examples).
Education only, not investment, tax or legal advice. We show IRS rules and do math on the numbers you type; we don't tell you what to buy or which account to pick. Your plan's own rules (its summary plan description) can be stricter. No company pays to be on this page, and there are no partner links.
If your plan allows loans: the lesser of $50,000 (reduced if you had a higher loan balance in the last 12 months) or the greater of $10,000 or half your vested balance, minus what you already owe (IRS loan FAQ).
Generally 5 years, with equal payments at least every 3 months. A loan to buy your main home can be longer. Unpaid balances become a taxable distribution.
When it vests. Your own contributions are always 100% vested. Employer money follows the plan's schedule, such as 100% after 3 years or 20% a year from year 2 to year 6.
Estimates, not financial advice. Taxes, insurance, PMI and fees vary by lender, county and city; confirm with your lender, dealer and state agency before acting.