The 401k Checklist

By Claire Paulson
Published April 03, 2026

1️⃣ Basic Structure of Your 401k

Most employers offer two contribution types:

Traditional 401k

  • Contributions are pre-tax (reduce taxable income).
  • Growth is tax-deferred.
  • Withdrawals are taxed as ordinary income.

Roth 401k

  • Contributions are after-tax (no deduction).
  • Growth is tax-free.
  • Qualified withdrawals are tax-free.



Withdrawal Rules

  • Age 59½ is the standard age for penalty-free withdrawals.
  • The Rule of 55 may allow penalty-free withdrawals from the 401k of the employer you separated from, if you leave your job in (or after) the year you turn 55. Income tax still applies.
  • Before 59½, nonqualified withdrawals are generally subject to income tax + 10% penalty (unless an exception applies).



2️⃣ Contribution Limits (2026 IRS Limits)

(Employee deferral limits are adjusted periodically for inflation.)

  • Employee deferral: $24,500
  • Age 50+: additional $8,000 catch-up
  • Total employee + employer limit: $72,000
  • Age 50+ total: $80,000

Always verify current limits directly on IRS.gov, as limits can change and special catch-up rules may apply depending on age and plan structure.



3️⃣ Employer Contributions

Does your employer offer:

  • Matching?
  • Profit-sharing?
  • Both?

Important:

  • Employer match is typically contributed on a pre-tax basis.
  • Some plans may allow employer contributions to be treated as Roth (taxable when contributed).
  • Understand the vesting schedule — you may not immediately own employer contributions.

If you leave before vesting, you may lose part of the match.



4️⃣ Fees — The Silent Wealth Destroyer

Ask:

  • What are the administrative / recordkeeping fees?
  • Are there managed account fees?
  • Are there advisor fees?
  • What are the fund expense ratios?

As a rule of thumb:

  • 0.10%–0.25% total plan cost = reasonable.
  • 0.50%+ total cost = expensive.

Each 0.10% costs $10 per year per $10,000 invested.

Over decades, this compounds significantly.



5️⃣ Investment Options

What does your plan offer?

  • Low-cost index funds?
  • Target-date funds?
  • Brokerage window (self-directed option)?
  • Managed portfolios?
  • Robo-advisor option?

Target-date funds are commonly the default investment. Review:

  • Expense ratio
  • Asset allocation
  • Aggressiveness

If you have a long horizon, a simple low-cost index portfolio may be preferable.



6️⃣ Beneficiaries

Confirm:

  • Are beneficiaries properly designated?
  • Are they up to date?

This is critical — 401k accounts typically avoid probate, but only if beneficiaries are properly listed.



7️⃣ After-Tax Contributions & Mega Backdoor

Does the plan allow:

  • After-tax (non-Roth) contributions beyond the employee deferral limit?
  • In-plan Roth conversions?
  • In-service Roth conversions?
  • Immediate automatic conversions?

If yes, you may be able to implement a Mega Backdoor Roth strategy, depending on plan rules.

Ask:

  • How frequently can conversions occur?
  • Are there fees?
  • What is the total contribution limit?



8️⃣ In-Plan Roth Conversions

If allowed, you may convert pre-tax funds to Roth inside the 401k.

Key points:

  • This is a taxable event.
  • Converted pre-tax amounts increase taxable income.
  • Future growth becomes tax-free.

This can be powerful in low-income years — but requires planning.



9️⃣ In-Service Distributions

Some plans allow in-service distributions before separation.

This may allow moving part of your balance into:

  • IRA
  • Roth IRA

Check:

  • Age restrictions
  • After-tax-only restrictions
  • Frequency limits



🔟 Loans

Does the plan allow 401k loans?

Ask:

  • Maximum loan amount?
  • Repayment term?
  • Interest rate?
  • What happens if you leave the company?

Leaving employment typically triggers accelerated repayment.

Unpaid balances may become taxable distributions.



1️⃣1️⃣ Portability When Switching Jobs

Upon leaving:

  • Can you keep the funds in the plan?
  • What are the fees after separation?
  • Does the plan force distributions under certain balance thresholds?
  • Can you roll over to:
  • New employer 401k?
  • IRA?
  • Roth IRA?

Also ask whether a reverse rollover (moving traditional IRA funds into your 401k) is allowed.

Note: Roth IRAs cannot be rolled into a Roth 401k.



1️⃣2️⃣ Rule of 55 Planning

If you may retire early:

  • Keeping assets in the current/last employer’s 401k may allow access under the Rule of 55.
  • Rolling everything into an IRA removes this option.

This is often overlooked during job changes.



1️⃣3️⃣ Roth IRA Interaction

Does contributing to your 401k affect:

  • Roth IRA contribution eligibility?
  • Traditional IRA deductibility?

If income limits prevent direct Roth contributions, consider:

  • Backdoor Roth strategy (with pro-rata considerations).



1️⃣4️⃣ Is There a Fiduciary Advisor?

If your employer offers advisory services:

  • Is the advisor a fiduciary (CFP®, RIA)?
  • Fee-only or commission-based?
  • Are fees fully disclosed?

Not all advisors are legally required to prioritize your interests.



Final Thoughts

A 401k is not just a payroll deduction.

It is often the largest investment account you own.

Review:

  • Contributions
  • Fees
  • Investment allocation
  • Match optimization
  • Advanced features
  • Withdrawal rules
  • Portability strategy

Especially when switching jobs, take control before making automatic rollover decisions.

A single overlooked fee or missed match can cost tens of thousands over time.

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