Should You Increase Your 401(k) During Open Enrollment?

IN THIS ARTICLE

• Why Open Enrollment Matters
• How Much to Contribute
• Catch-Up Contributions
• Roth vs Pre-Tax
• When to Talk to an Advisor

Typically employees spend open enrollment focused on health insurance, comparing plan tiers and updating HSA elections. What often goes unnoticed is how benefit cost changes affect take-home pay, and in turn, how much can go toward a 401(k).

This connection matters more than it might seem. Most workers believe it's a good idea to review their retirement savings plan during open enrollment, but few actually do. That gap between intention and action is what makes open enrollment one of the few moments each year when all the relevant variables are in view at once: benefit costs, income, savings rate, and retirement horizon.

Most plans allow contribution changes at major life event milestones, but the annual enrollment window is when the full picture comes into focus. Using it to evaluate a contribution increase can turn a routine benefits task into a meaningful step toward retirement readiness.

Why Open Enrollment Is a Smart Time to Revisit Your 401(k)

Open enrollment is already the moment when employees weigh health plan options and think about how benefit changes will affect their paycheck, and the 401(k) decision is a natural extension of that review.

When health insurance premiums rise or plan structures change, take-home pay shifts. A higher premium might reduce the dollars available for retirement contributions, while a plan change that lowers out-of-pocket costs could free up room to save more. Looking at the full picture during open enrollment helps aim for a contribution increase that fits within your actual budget.

The compounding case for acting now is worth making. A 1% contribution increase does not feel significant in isolation, but framed against a 10- or 20-year horizon, the long-term impact becomes a compelling reason to act now rather than deferring to next year.

Some plans offer auto-escalation, which automatically increases contributions by a set percentage each year. For investors who want to save more but hesitate to make manual changes, enrolling in auto-escalation during open enrollment is a simple way to stay on track without revisiting the decision annually.

How Much Should You Contribute to Your 401(k)?

To determine the sequence, start by contributing enough to capture the full employer match, since that match is essentially additional compensation left on the table if not claimed. From there, work toward a total savings rate of 10 to 15% of income, including the match. Then consider maximizing up to the IRS annual limit if circumstances allow.

This sequence is a practical hierarchy rather than a checklist. Not every investor will reach every level at once. The goal is steady progress over time.

Catch-Up Contributions for Investors 50 and Older

Investors 50 and older have access to contribution limits that go beyond the standard annual cap. Open enrollment is a practical moment to decide whether to take advantage of them.

In 2026, the standard 401(k) contribution limit is $24,500.² Investors who are 50 or older by year-end can contribute an additional $8,000 in catch-up contributions, bringing their total to $32,500. A higher contribution rate for the years remaining before retirement can compound meaningfully, even over a shorter horizon.

Under SECURE 2.0, a super catch-up provision applies to investors ages 60 to 63. Eligible investors can contribute up to $11,250 in catch-up contributions rather than the standard $8,000, bringing their total annual limit to $35,750 in 2026. Eligibility returns to the standard catch-up amount at age 64.

Roth vs Pre-Tax 401(k) Contributions

The Roth versus pre-tax decision naturally surfaces when an investor is already considering a contribution increase. Many investors default to pre-tax contributions without actively choosing them, and open enrollment is a practical moment to revisit whether that default still makes sense.

The core tradeoff is straightforward. Pre-tax contributions reduce taxable income today, which lowers the current tax bill, but withdrawals in retirement are taxed as ordinary income. Roth contributions are made with after-tax dollars, so they do not reduce taxable income now, but qualified withdrawals in retirement are potentially tax-free. The right choice depends primarily on whether the investor expects to be in a higher or lower tax bracket in retirement than today.

This tradeoff is genuinely difficult to forecast, particularly for those who are mid-career or whose retirement income picture is not yet clear. Some investors split contributions between pre-tax and Roth to hedge against future tax uncertainty, and many plans allow this.

Under SECURE 2.0, a Roth catch-up mandate takes effect in 2026. Workers who are 50 or older and earned more than $150,000 in FICA wages in the prior year must make their catch-up contributions on a Roth basis.³ This affects only catch-up dollars, not base contributions.

When to Talk to a Financial Advisor

Many investors can work through the basic contribution increase decision on their own, particularly if their situation is straightforward. If they are not yet capturing their full employer match, their budget has room, and they are not approaching catch-up eligibility, the decision may not require professional help.

The decision becomes complex enough that professional coordination adds clear value in specific circumstances:

• You are approaching or within catch-up and super catch-up eligibility ages.
• You are weighing a Roth conversion alongside a contribution increase.
• You are managing multiple retirement accounts or coordinating with a spouse's plan.
• You are thinking about how contribution decisions interact with Social Security timing or required minimum distributions later.

LPL financial advisors are part of a broader planning process that may also involve tax and legal professionals. The contribution decision intersects with tax strategy, benefit cost planning, catch-up eligibility, and Roth versus pre-tax tradeoffs. That complexity is where advisor coordination adds value.