401(k) basics: match, vesting, contributions

A 401(k) is an employer-sponsored retirement account. Money goes in pre-tax, grows tax-deferred, and is taxed on the way out in retirement. The account has your name on it and follows you if you change jobs. In 2026, the contribution limit is $23,500 for employees under 50.

The employer match

Most 401(k) plans include a matching contribution from your employer. Typical match: 50% of your contribution up to 6% of your salary (so you contribute 6%, they add 3%, total 9% going into your account). Some generous plans match dollar-for-dollar up to 6%.

Vesting

Vesting is how long you have to stay at a company before the employer match becomes fully yours. Common schedules: immediate (rare and excellent), 3-year cliff (you get nothing if you leave in years 1–2, everything if you leave after year 3), or graded (20–25% per year over 4–5 years). Your own contributions are always 100% yours from day one.

Traditional vs. Roth 401(k)

Most plans let you choose: Traditional (pretax contribution, taxed in retirement) or Roth (post-tax contribution, tax-free in retirement). Rule of thumb: if you think your tax rate will be higher in retirement, pick Roth. Lower, pick Traditional. Unsure, split the difference.

When you leave a job

Your 401(k) stays with the old employer until you move it. Options: leave it, roll it to the new employer's 401(k), or roll it to an IRA. Rolling to an IRA usually gives you the most flexibility and cheapest investment options.