How a 401(k) contribution changes your take-home pay

Raise your 401(k) contribution from zero to 6% of pay and you might expect your paycheck to shrink by 6%. It doesn't. On a $60,000 salary, a $138.46 contribution makes take-home pay fall by only $121.85, and with an employer match, $207.69 lands in your account. Here's how that works and how to check it on your own pay stub.

Why does my paycheck drop by less than I contribute?

Because the money goes in before income tax is worked out. The IRS says traditional 401(k) deferrals aren't subject to income tax withholding when they're made. So every dollar you defer is a dollar your employer doesn't withhold federal income tax on. (State income tax rules vary, so this guide leaves state tax out.)

How much you save depends on your tax bracket, the rate on your last dollars of taxable income. For 2026 a single filer pays 12% on taxable income between $12,400 and $50,400, and 22% from there up to $105,700, after a standard deduction of $16,100 (IRS). Someone earning $60,000 has about $43,900 of taxable income, so they sit in the 12% bracket: each $100 deferred saves about $12 of federal tax.

Does a 401(k) contribution lower Social Security and Medicare tax?

No. A traditional 401(k) deferral still counts as wages for Social Security and Medicare, according to the IRS. You pay 6.2% and 1.45% on your full gross pay either way (Social Security Administration). That's why your pay stub can show a lower federal taxable wage than its Social Security and Medicare wage, and why the $176.54 payroll-tax line in the example below never moves.

How much does 3%, 6% or 10% change a $60,000 paycheck?

Take a $60,000 salary paid every two weeks: $2,307.69 gross per paycheck. With no 401(k), federal income tax comes to about $193.08 a paycheck and take-home pay to $1,938.08. Now add a traditional 401(k), with an employer that matches 50 cents per dollar on the first 6% of pay, the same style of formula the IRS uses as an example:

At 6%, you give up $121.85 of take-home pay and $207.69 goes into the account: about $1.70 saved for each dollar your paycheck shrinks. Over a year that's $5,400 saved for $3,168 less take-home pay.

Going from 6% to 10% still saves tax, but there's no extra match, so each extra dollar of take-home pay buys less: $92.31 more in the account for $81.23 less per paycheck.

Why shouldn't I leave the employer match on the table?

An employer match is pay you only get if you contribute. In the example, contributing 3% instead of 6% leaves $34.62 a paycheck, or $900 a year, unclaimed. Counted as part of your pay, the full match is worth 3.0% of salary, which is as much as a decent raise. Our raise vs. inflation guide shows how hard a 3% raise is to come by.

Two things to check in your plan documents:

• The formula. Plans set their own match, for example 50 cents or a full dollar for each dollar you put in, up to a set percentage of pay. Contribute at least enough to reach the cap.
• Vesting. Your own deferrals are always 100% yours. Employer contributions can follow a vesting schedule that requires some years of service, according to the IRS. If you're thinking about switching jobs, find out how much of the match you'd keep.

What changes with a Roth 401(k)?

Many plans let you make deferrals after tax as designated Roth contributions (IRS). Roth money doesn't lower your taxable wages, so your paycheck falls by the full amount. At 6% of pay, take-home drops by $138.46 with Roth, against $121.85 with traditional. The extra $16.62 is federal tax paid now instead of later. In return, a qualified distribution from a designated Roth account is not included in your income, according to the IRS. To be qualified, it generally has to come at least five tax years after your first Roth contribution and after you reach age 59½ (or on disability or death). Which is better depends on whether you expect a higher or lower tax rate in retirement, and that's a personal call. The employer match works the same way under either option; the IRS notes that an employer matching Roth contributions puts the match into a pre-tax account.

How much can I put in a 401(k) in 2026?

The same $24,500 limit covers 403(b), governmental 457 plans and the federal Thrift Savings Plan. For our $60,000 earner, reaching it would take 40.8% of pay, so for most people the practical limit is the budget, not the IRS.

How do I pick a contribution rate?

1. Start with the match. Find your plan's formula and contribute at least enough to get all of it.
2. Price it in take-home pay. Multiply the contribution by (1 − your bracket) for a rough paycheck cost. In the 22% bracket, $100 deferred costs about $78.
3. Raise it with your pay. Putting part of each raise into the 401(k) means take-home pay still goes up while savings grow.
4. Check the first paycheck after a change. The deferral, federal taxable wage and Social Security wage should move exactly as described above.

To see what the money you keep is worth per hour, run your take-home pay through our true hourly wage method.

Assumptions: a $60,000 salary paid in 26 equal paychecks; single filer taking the 2026 standard deduction of $16,100; no other income, credits or deductions; federal income tax shown as one 26th of the year's tax (actual withholding depends on your W-4 and can differ by a few dollars); Social Security 6.2% and Medicare 1.45%; a hypothetical match of 50 cents per dollar on the first 6% of pay. State and local income taxes are left out. General information, not tax or investment advice.

Common questions

How much will a 401(k) contribution reduce my paycheck?

With a traditional 401(k), by the contribution minus the federal income tax it saves. In the 12% bracket, every $100 you put in lowers take-home pay by about $88; in the 22% bracket, about $78. State income tax isn't counted here; check how your state treats 401(k) deferrals.

Does a 401(k) contribution lower Social Security and Medicare tax?

No. The IRS says traditional 401(k) deferrals aren't subject to income tax withholding when they're made, but they still count as wages for Social Security and Medicare. So those two lines on your stub stay the same.

Why does a Roth 401(k) shrink my paycheck more?

Roth contributions come out after tax, so they don't lower your taxable wages today. Your paycheck falls by the full amount you contribute. The trade-off is that qualified distributions later, generally after age 59½ and at least five years after your first Roth contribution, are not included in your income (IRS).

What is the 401(k) limit for 2026?

$24,500 of your own contributions, plus a catch-up of $8,000 if you are 50 or older ($32,500 in total). People aged 60 to 63 can use a higher catch-up of $11,250 instead (IRS). Employer matching contributions don't count toward your $24,500.

Is the employer match really free money?

It's part of your pay that only shows up if you contribute. Check your plan's vesting schedule, though: your own deferrals are always 100% yours, but employer contributions can vest over several years of service, so leaving a job early can mean leaving some of the match behind.

This article is general education, not personal financial advice. Figures in worked examples are calculated from the assumptions stated with them and are not forecasts.