Your 401(k) is quietly doing one of two things for you: building the retirement you want or falling short of it. Most workers sign up for their employer’s retirement plan during onboarding, pick a contribution rate, and never think about it again.
Bank of America’s Better Money Habits team published a guide identifying 10 questions that separate informed savers from those coasting on autopilot. Average 401(k) balances rose 11 percent in 2025 to $146,100 across nearly 25 million accounts, Fidelity Investments reported.
That headline looks encouraging until you realize most participants never max out their plans or capture their full employer match. Here is what Bank of America wants you to examine about your retirement plan before another quarter passes you by.
Your employer 401(k) match could be the biggest raise you’ve ever collected
The most valuable feature of any 401(k) plan is the employer match, and a surprising number of workers fail to capture the full amount available to them. Bank of America’s guide stresses that matching structures vary widely, from dollar-for-dollar matches to partial matches of 50 cents per dollar contributed.
“It’s a tradeoff. You’re either taxed upfront or taxed when you withdraw the money,” Rob Williams, managing director of financial planning, Schwab Center for Financial Research, told Kiplinger.
The average employer match in 2026 falls between 4% and 6% of compensation, with a 50% match on contributions up to 6% of salary being the most common structure, Bureau of Labor Statistics data show. At a $75,000 salary, contributing the full 6% under that match formula adds $2,250 in employer contributions annually.
Roughly one in four eligible employees does not contribute enough to receive the full employer match, forfeiting an average of $1,336 per year, according to a Financial Engines Study cited by CNBC. Over a 30-year career compounding at 7%, that unclaimed match grows to more than $130,000 in lost retirement wealth.
The 2026 401(k) contribution limits allow you to shelter income from taxes
The IRS raised the annual 401(k) employee deferral limit to $24,500 for 2026, up from $23,500 in the prior year, the agency confirmed in Notice 2025-67. Workers aged 50 and older can contribute an additional $8,000 in catch-up contributions, bringing their annual contribution limit to $32,500.
The SECURE 2.0 Act also created a super catch-up for workers between ages 60 and 63, allowing them to contribute $11,250 instead of the standard $8,000 for a total of $35,750, the IRS confirmed. The combined employee and employer contribution limit rose to $72,000 for the year.
Only about 14% of plan participants contribute the IRS maximum in any given year, Vanguard’s How America Saves report found. Even a 1% increase in your deferral rate, applied consistently over decades, generates meaningful growth through compounding.
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Choosing between a Roth 401(k) and a traditional 401(k) shapes your tax future
Bank of America highlights the Roth 401(k) option as one of the most underused features inside employer-sponsored retirement plans. With a traditional 401(k), you contribute pre-tax dollars and reduce your taxable income today, but you owe income taxes on every withdrawal in retirement.Â
A Roth 401(k) flips that equation by accepting after-tax contributions now and delivering tax-free withdrawals later. Your choice between the two should depend on whether you expect a higher or lower tax bracket by the time you retire and begin drawing income.Â
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Younger workers early in their careers often benefit from Roth contributions because their current tax rate is typically lower than it will be later. Splitting contributions between both options can provide flexibility and diversify your tax exposure across different stages of retirement.
A major change for 2026 affects higher earners directly. If your prior-year FICA wages exceeded $150,000, all catch-up contributions must now be designated as Roth, as SECURE 2.0 requires. If your employer’s plan does not yet offer a Roth option, you will be unable to make catch-up contributions at all this year.
Check with your human resources department as soon as possible to confirm your plan’s Roth availability. Roth 401(k) accounts are also exempt from required minimum distributions during the original owner’s lifetime, giving you more control over withdrawals.
Automatic 401(k) enrollment helps, but default rate is not enough
An increasing number of companies automatically enroll new employees into their 401(k) plans at hire, Bank of America notes in its guide. The problem is that most employers set the default contribution rate at just 3% or 4% of your gross salary, which falls well below what experts recommend.
Most financial professionals, including those at Fidelity, recommend a total savings rate of 15% of gross income, combining your contributions with the employer match. The average employee contribution rate was 9.5% in 2025, with the employer match adding 4.7% for a combined total savings rate of 14.2%, Fidelity reported.
Ask your plan administrator whether your employer offers automatic escalation, a feature that bumps your contribution rate by 1% each year. In 2024, 29% of participants had their contribution rate automatically increased by an escalation feature, Vanguard’s data showed.
Turning it on ensures your savings rate grows alongside your income without requiring you to manually make changes.
What you do with your 401(k) determines your freedom
Bank of America’s checklist reads less like a set of instructions and more like a reminder to stay aware of how your 401(k) evolves over time. Contribution levels, employer matching, tax treatment, and default plan settings all influence outcomes in ways that are easy to overlook but difficult to correct later.Â
The data highlights how small, repeated gaps can compound into meaningful differences across decades. Rather than requiring constant oversight, the broader takeaway is to revisit these elements occasionally and understand what is happening beneath the surface.
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