Saving costs less than it looks
How a 401(k) really affects your paycheck
A traditional 401(k) contribution comes out before federal income tax, so it lowers your taxable income. That means a dollar saved reduces your take-home by less than a dollar — the difference is the tax you would have paid. The higher your bracket, the cheaper it is to save.
Worked example: $90,000, contributing 10%
On a $90,000 single salary, contributing 10% means $9,000 into your 401(k). Without it, take-home is about $72,145. With it, taxable income drops and federal tax falls by roughly $1,980 — so take-home only falls to about $74,125 minus the $9,000 saved. In other words, $9,000 of retirement savings costs you only about $7,020 in lost take-home. Every $1 saved costs about 78 cents.
Contribution rate vs. real cost — a $90,000 salary (single)
Because the tax saving scales with the dollars you defer, every contribution level costs the same 78 cents on the dollar in the 22% bracket. Here's how the same $90,000 earner's paycheck changes as the contribution rate climbs:
| Contribution rate | Into 401(k) | Federal tax saved | Real cost to your paycheck | Cash left in pocket |
|---|---|---|---|---|
| 0% | $0 | $0 | $0 | $72,145 |
| 5% | $4,500 | $990 | $3,510 | $68,635 |
| 10% | $9,000 | $1,980 | $7,020 | $65,125 |
| 15% | $13,500 | $2,970 | $10,530 | $61,615 |
"Real cost" is the contribution minus the federal income tax it saves — the actual drop in your take-home cash. In a state with income tax, the cost per dollar is even lower because you also skip state tax on the deferral.
Traditional vs. Roth
This tool models a traditional (pre-tax) 401(k), which cuts today's tax bill. A Roth 401(k) uses after-tax dollars, so it doesn't change your current paycheck but grows tax-free. To see the contribution limits and employer match in detail, use the 401(k) contribution calculator.
Questions
Paycheck after 401(k) FAQ
How much does a 401(k) reduce my paycheck?
By less than you contribute, because the contribution is pre-tax. In the 22% bracket, every $1 you put in lowers your take-home by only about 78 cents — the other 22 cents is federal tax you would have paid anyway.
What is the real cost of contributing to a 401(k)?
The real cost is your contribution minus the tax you save. Contributing $9,000 in the 22% bracket saves about $1,980 in federal tax, so the true hit to your take-home is roughly $7,020. State tax savings, where they apply, lower the cost further.
What is the 401(k) contribution limit for 2026?
The 2026 employee elective-deferral limit is $24,500, with an additional $8,000 catch-up contribution allowed for workers aged 50 and over. These limits are set by the IRS and adjusted for inflation each year.
Does a 401(k) lower my Social Security and Medicare tax?
No. Traditional 401(k) contributions reduce your federal and state income tax, but Social Security (6.2%) and Medicare (1.45%) are still calculated on your full gross wages, exactly as shown in this calculator.
- Sources: IRS Rev. Proc. 2025-32 (2026 brackets & standard deduction) · SSA 2026 OASDI wage base ($184,500) · IRS Topic No. 751.
- 🔄 Last updated June 27, 2026 · Tax year 2026
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