How Much Does a 401k Take Out of Your Paycheck?

A 401(k) is a workplace retirement savings plan that allows employees to contribute a portion of their pre-tax or after-tax salary to an investment account. This plan provides a structured way to save for retirement, often with tax advantages, by deducting contributions directly from each paycheck. The amount taken out depends on several factors, including your elected contribution rate and federal regulations.

Your 401k Contribution Basics

Your 401(k) contributions are amounts you choose to set aside from your gross pay before it reaches your bank account. These are distinct from any contributions your employer might make, such as matching funds or profit-sharing, which are added to your retirement account separately and do not directly reduce your paycheck.

You generally have two main ways to contribute to a 401(k): pre-tax or Roth. A pre-tax 401(k) contribution reduces your taxable income in the current year. For example, if you earn $1,000 and contribute $100 pre-tax, your taxable income for federal and most state income taxes becomes $900, which can lead to lower tax withholding from your paycheck.

In contrast, a Roth 401(k) contribution does not reduce your current taxable income. The money you contribute to a Roth 401(k) has already been taxed, so your take-home pay is directly reduced by the full contribution amount without an immediate tax benefit. However, qualified withdrawals from a Roth 401(k) in retirement are entirely tax-free, including earnings.

Key Factors Determining Your Deduction

The most significant factor determining how much is taken from your paycheck for your 401(k) is the contribution rate you elect. If you choose to contribute a percentage of your gross pay, the actual dollar amount deducted will fluctuate with your gross earnings each pay period. For instance, a 5% contribution on a $2,000 bi-weekly paycheck will result in a $100 deduction.

Your gross pay for each pay period directly influences the deduction, especially for percentage-based contributions. A fixed dollar amount contribution, however, remains constant regardless of fluctuations in your gross pay, as long as your gross pay is sufficient to cover the deduction.

The Internal Revenue Service (IRS) sets annual limits on the maximum amount an individual can contribute to a 401(k) plan. For 2025, the employee contribution limit is $23,500. If you are age 50 or older, you may be eligible to make additional “catch-up” contributions. For 2025, the standard catch-up contribution limit for individuals aged 50 and over is an additional $7,500, allowing a total contribution of $31,000. A higher catch-up contribution limit of $11,250 applies for those aged 60 to 63 in 2025, if their plan allows.

Some 401(k) plans might also have their own specific rules, such as minimum or maximum contribution percentages. The total amount contributed to your 401(k) from all sources, including both employee and employer contributions, cannot exceed a separate annual limit. For 2025, this combined limit is $70,000, or $77,500 for those aged 50 and over.

Estimating and Modifying Your Contributions

To determine your current 401(k) deduction, you should first check your pay stub. You can also find this information through your employer’s online payroll portal or by contacting your Human Resources (HR) department.

Calculating your deduction is straightforward. If you contribute a percentage, multiply your gross pay for the period by your elected percentage. For example, if your bi-weekly gross pay is $2,500 and you contribute 6%, your deduction is $150. If you contribute a fixed dollar amount, that specific amount will be deducted each pay period.

Adjusting your 401(k) contributions is a simple process. Most employers provide an online portal or a form through their HR or benefits department where you can change your contribution rate or amount. You will select your new percentage or dollar amount and indicate whether it applies to pre-tax or Roth contributions. Many plans allow you to set your contributions as either a percentage of your salary or a fixed dollar amount per pay period. After submitting your change, it usually takes one to two pay periods for the new deduction to take effect.

Understanding Your Take-Home Pay Impact

A 401(k) contribution directly reduces your gross pay, which then affects your take-home pay. This reduction is immediate and visible on your pay stub.

For pre-tax 401(k) contributions, the impact on your take-home pay is less than the full amount of the contribution. This is because pre-tax contributions reduce your taxable income for federal and often state income tax purposes. For example, if you contribute $100 pre-tax, your taxable income is reduced by $100, which means less income tax is withheld from your paycheck. Pre-tax 401(k) contributions do not reduce income subject to Social Security and Medicare (FICA) taxes.

Roth 401(k) contributions, however, do not reduce your current taxable income. Since these contributions are made with after-tax dollars, the full amount of your Roth contribution directly reduces your take-home pay without an offsetting reduction in income tax withholding. The benefit of Roth contributions comes later, as qualified withdrawals in retirement are tax-free.

The overall effect on your take-home pay depends on your chosen contribution type and amount. A pre-tax contribution might reduce your take-home pay by $75 for a $100 contribution (assuming a 25% combined tax rate saved), while a Roth contribution of $100 would reduce it by the full $100.