It’s never too late to start planning for retirement—whether you’re single or a couple—there is money to save, but you need to choose the right options.
It all starts with your 401(k) and knowing the maximum limit, which is $24,500 per person.
“Couples make a big mistake by treating retirement accounts as separate vehicles rather than as a system,” Chad Cummingsattorney and accountant at Cummings & Cummings Law tells Realtor.com®. “When one spouse maximizes a traditional 401(k) and the other contributes to a Roth without coordination, the tax consequences in retirement depend on the order of withdrawals, and most couples don’t model this or even realize the problem exists.”
A 401(k) is a retirement plan that allows employees to invest a portion of their salary before taxes are withheld from their personal accounts. Under certain circumstances, an employer may “match” or contribute to an employee’s account.
The IRS explains that a basic plan can be a profit-sharing, stock dividend, pre-ERISA money-purchase pension, or a rural cooperative plan.
Generally speaking, deferred wages (elective deferrals) are not subject to federal income tax when deferred and are not reported as taxable income on the employee’s personal income tax return, according to the IRS.
IRA outlines the tax advantages of a 401(k):
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Employer contributions are deductible on the employer’s federal income tax return, provided the contributions do not exceed the limits described in Section 404 of the Internal Revenue Code. See Publication 560, Small Business Retirement Plans (SEP, SIMPLE, and Qualified Plans) PDF for more information about deduction limitations.
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Optional deferral and investment income are currently not taxed and may be tax deferred until distributed.
But how much you contribute could mean more money in your pocket during your golden years.
“The 401(k) limit for 2026 is $24,500 per person, with an additional $7,500 available for those 50 and older,” Cummings said.
He recommends getting the most out of both, especially if the employer offers a match.
Cummings added: “The deferment itself increases returns. A couple who fails to jointly max out their contributions over 10 years stands to lose nearly $500,000… and even more when the market is doing well.”
It’s also important to remember tax withholding, as this can affect your refund when you file your taxes.
“As for withholding, I recommend the minimum amount allowed by law,” Cummings said. “The IRS does not pay interest on overpayments, and every additional dollar withheld is an interest-free loan to the federal government. Couples who file jointly but each set their withholding to single face year-end liabilities and sometimes underpayment penalties because no one calculated the combined figure.”
