Traditional 401(k) contributions are made with pre-tax dollars, reducing your current taxable income. For 2026, the contribution limit is $23,500 for employees under age 50, and $31,000 for those 50 and older (including catch-up contributions of $7,500).
A worker earning $80,000 who contributes $15,000 to a traditional 401(k) reports only $65,000 in taxable income. This immediate tax deduction can lower your marginal tax rate and reduce total federal tax owed.
Traditional IRA contributions may be tax deductible depending on your income and whether you or your spouse are covered by a workplace retirement plan. For 2026, the contribution limit is $7,000 ($8,000 if age 50+).
If neither you nor your spouse has a workplace plan, your traditional IRA contribution is fully deductible regardless of income.
Traditional retirement accounts provide tax savings now: contributions reduce current taxable income, but withdrawals in retirement are taxed as ordinary income. Roth accounts use after-tax contributions with tax-free growth and tax-free withdrawals.
If you expect to be in a lower tax bracket during retirement, traditional accounts provide more after-tax value. If you expect higher future taxes or want tax-free income, Roth accounts may be preferable.
HSAs provide a triple tax advantage: contributions reduce taxable income, growth is tax free, and withdrawals for qualified medical expenses are tax free. For 2026, contribution limits are $4,300 for individuals and $8,550 for family coverage.
After age 65, HSA funds can be withdrawn for any purpose with ordinary income tax but no penalty — functioning like a supplemental retirement account.
Our Tax Calculator lets you model retirement contribution impacts. Enter your income, subtract various contribution scenarios, and instantly see your adjusted federal tax liability.