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Retirement

401(k) in NYC: limits and what it saves you

The 2026 employee contribution limit is $24,500. Because New York City taxes wages at three levels on top of FICA, a pre-tax contribution here is worth more than the same contribution almost anywhere else in the country.

By the NYC Paycheck Calculator TeamReviewed October 12, 2026Editorial standards

2026 elective deferral limit

$24,500

Catch-up, age 50+

$8,000

Catch-up, age 60 to 63

$11,250

Maximum with catch-up

$32,500

What the full $24,500 costs and saves

Contributing the maximum does not remove that amount from your life at face value. It removes the after-tax cost, because the contribution itself would otherwise have been taxed. The table shows the tax saving and the real cost in take-home pay at four salary levels for a single New York City resident.

SalaryContributionIncome tax savedReal cost in take-homeCost as share of salary
$75,000$24,500$6,058$18,44224.6%
$100,000$24,500$7,719$16,78116.8%
$150,000$24,500$8,275$16,22510.8%
$250,000$24,500$10,468$14,0325.6%

Single filer, standard deductions, residency in the five boroughs. Social Security and Medicare are unaffected by a traditional 401(k) contribution, so FICA is not part of the saving.

Why it is worth more in New York City

A pre-tax contribution reduces taxable income, and New York City calculates its resident income tax on the same New York taxable income figure the state uses. So every deferred dollar escapes federal tax, New York State tax and New York City tax at once, instead of two layers as it would in most states.

The counterpart is that New York taxes retirement income when you take it, though the state gives a generous exclusion for pension and retirement income after a certain age. New York City resident tax, however, does not apply to someone who has moved out of the city by the time they draw on the account, which is a real consideration for long-term residents.

Model your own contribution

Enter any per-paycheck amount in the NYC paycheck calculator pre-tax field to see the effect on your net pay and effective tax rate. Teachers should read the UFT differentials page, since the Teachers’ Retirement System contribution works differently from a 401(k), and city employees should look at NYC Deferred Comp.

401(k) questions

What is the 401(k) contribution limit for 2026?+

The employee elective deferral limit for 401(k), 403(b) and governmental 457(b) plans is $24,500 for 2026, up from $23,500 in 2025. Employees aged 50 or over can add a catch-up contribution of $8,000, and those aged 60 to 63 have a higher catch-up of $11,250, for a potential total of $32,500.

How much tax does a 401(k) contribution save in New York City?+

It saves federal, New York State and New York City income tax on the deferred amount. It does not save Social Security or Medicare, because traditional 401(k) contributions are still FICA wages. In New York City that means the saving is larger than in most of the country, because the city adds a fourth income tax layer that the contribution also reduces.

What does a $24,500 contribution actually cost me?+

At a $100,000 salary in New York City, contributing the full $24,500 costs roughly $16,781 of take-home pay for the year, because about $7,719 of it would otherwise have gone to tax. Put another way, the effective price of the contribution is a fraction of its face value.

Is it better to contribute to a 401(k) or a 457(b)?+

They are separate limits, not competing ones, so a New York City employee with access to both can generally use both. The 457(b) has the advantage that withdrawals are not subject to the 10% early distribution penalty after leaving employment, which matters if you might retire before 59 and a half.

Does a 401(k) contribution change my NYC resident tax?+

Yes. A traditional 401(k) contribution reduces New York taxable income, and the New York City resident tax is calculated on that same figure, so the city layer falls along with the state and federal layers. A Roth contribution does not reduce current taxable income, so it saves nothing today.

Official sources

$7,500.00 is the 2026 IRA limit, with a $1,100 catch-up for those aged 50 and over.