Your 401(k) Has a Calendar Problem, and August Is the Last Good Month to Fix It

Somewhere in your payroll portal there is a percentage you chose once, probably during onboarding, probably in a hurry, and almost certainly without a calculator anywhere nearby. It has been quietly running your retirement ever since. Most people never look at it again until a raise, a job change, or a panicked email from HR in the second week of December. That is unfortunate, because late August is arguably the most useful moment in the calendar to open that screen. You still have roughly eight or nine paychecks left in the year, which is enough runway to change the outcome and not so little that the change has to be violent. Wait until Thanksgiving and your only remaining options are extreme ones.

The Limit Is Annual. Your Paycheck Is Not.

Start with the numbers, because they moved this year. For 2026 the IRS raised the elective deferral limit for 401(k), 403(b), most governmental 457 plans, and the federal government’s Thrift Savings Plan to $24,500, up from $23,500 in 2025. The IRA limit rose to $7,500 from $7,000. Those figures come from the agency’s own announcement and the accompanying cost of living notice, and they are worth knowing precisely rather than approximately, because payroll systems enforce them to the dollar and do not care about your intentions.

Here is where people get tangled. The limit is annual. Your contribution is a percentage of each paycheck. Those two facts do not speak to each other unless you make them. If you are paid twice a month, you have 24 pay periods, so reaching $24,500 means setting aside roughly $1,021 each time. On a $150,000 salary that works out to a deferral rate of about 16.3 percent. On a $90,000 salary the same target requires about 27 percent, which for a great many households is simply not available cash. Neither figure is a suggestion. It is arithmetic. The reason to run it in August rather than January is that you now have eight months of actual data about what your budget tolerated, instead of a guess.

Run the check in reverse as well. Pull your most recent pay stub, find the year to date deferral figure, subtract it from $24,500, and divide what is left by the number of paychecks remaining. That is the per paycheck amount required to finish at the cap. If the result looks absurd, congratulations, you have learned something important in August rather than in the final week of December when payroll has already processed the last run of the year and nothing can be undone.

Where the Free Money Quietly Leaks Out

Now the expensive part, and the one that catches high savers rather than reluctant ones.

Suppose you decide to be aggressive and front-load. You set your deferral at 20 percent, you hit the annual cap sometime in the late summer, and you spend the rest of the year contributing nothing because payroll has shut the valve. Feels efficient. More months of market exposure, more time for compounding, and the discipline problem solved early.

The trouble is the employer match. Many plans calculate the match per pay period, not per year. If your employer matches the first 5 percent of pay you contribute, and in October you contribute zero because you already maxed out, then in October the match is also zero. There is no deferral to match. Do that for four months and you have handed back a meaningful slice of compensation that was sitting there with your name on it.

The safety valve is a plan feature called a true-up. In a plan that offers one, the administrator looks at your total deferrals at year end, calculates the match you would have received had you contributed evenly across every period, and deposits the difference, usually in the first months of the following year. In a plan without one, the shortfall is permanent. Some employers offer true-ups. Some do not. The only way to know which kind you have is to read the summary plan description or ask your benefits contact directly, and the question is short enough to fit in one email: does our plan true up the match at year end?

That single question is worth more than most of the investment content you will read this month. It costs nothing to ask, and the answer determines whether front-loading is a smart cash flow choice or an unforced error.

The Age Brackets Almost Nobody Reads Carefully

If you are 50 or older, the standard catch-up contribution for 2026 is $8,000 on top of the $24,500, for a combined ceiling of $32,500. But there is a second tier that many savers still do not know exists. For employees who are 60, 61, 62, or 63 during the year, the catch-up is $11,250 instead of $8,000, a provision created by the SECURE 2.0 Act. It is age based, not birthday based in the way people assume, and it applies only if your plan has adopted it. Turn 64 and you drop back to the ordinary catch-up amount. That narrow window is worth roughly $3,250 a year of additional shelter for four years, and it is easy to miss entirely if nobody points it out.

There is also a rule that took effect this year and is still surprising people mid-stream. Under SECURE 2.0, participants whose prior year wages from the employer sponsoring the plan exceeded $150,000 must make their catch-up contributions on a Roth basis rather than pre-tax. The IRS finalized regulations on this in September 2025, with 2026 treated as a good faith transition year and stricter compliance beginning in 2027. If you fall into that bracket and assumed your catch-up was still lowering this year’s taxable income, check a pay stub. The answer may not be what you have penciled into your tax planning.

The Accounts You Forgot You Also Have

The workplace plan is not the whole board. For 2026 the IRA limit is $7,500, and the IRA catch-up for savers 50 and over is now $1,100, up from a flat $1,000 that sat unchanged for years before SECURE 2.0 indexed it to inflation.

Whether a traditional IRA contribution is deductible depends on income and workplace plan coverage. For a single filer covered by a plan at work, the deduction phases out between $81,000 and $91,000 of income in 2026. For married couples filing jointly where the contributing spouse is covered, the range runs from $129,000 to $149,000. Roth IRA eligibility phases out between $153,000 and $168,000 for singles and heads of household, and between $242,000 and $252,000 for joint filers. And for lower and moderate income households there is the Saver’s Credit, which in 2026 is available up to $80,500 of income for joint filers, $60,375 for heads of household, and $40,250 for singles. That last one is a credit rather than a deduction, which makes it considerably more valuable per dollar than most people assume, and it goes unclaimed constantly.

The IRA deadline is not December 31. You generally have until the tax filing deadline the following spring. So the IRA can wait. The 401(k) cannot, and that asymmetry is exactly why the payroll screen deserves your attention first.

Why This Month and Not the Next One

There is a behavioral case for August that has nothing to do with tax code. Raises typically land in the first half of the year, and lifestyle expands to absorb them within a quarter or two. Redirecting part of an increase you have already grown accustomed to is harder in month eight than in month three, but it is still vastly easier than in month twelve, when holiday spending is competing for the same dollars and the emotional case for waiting until January is at its most persuasive.

There is also the plain mechanical point. Money contributed in September has four more months of market exposure than money contributed the following January. Over one year that difference is small and unpredictable. Repeated across a working career, the habit of catching these adjustments early rather than late is one of the few levers a saver controls completely, unlike returns, inflation, or what the Fed decides to do next.

Open the payroll portal. Find the percentage. Do the division. It takes about ten minutes, and it is the rare piece of financial work where the answer is genuinely knowable.

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This article is written for educational and informational purposes only and does not constitute financial or legal advice. The views and analytical frameworks presented draw on publicly available information and reported commentary from industry participants. Readers are encouraged to consult primary sources and form their own informed views on these complex topics.