You Set Your 401(k) Contribution in January. That Doesn't Mean You're On Pace.

In January, Bethany (a composite drawn from a pattern many plan participants describe) logged into her 401(k) portal, bumped her contribution percentage up a notch, and closed the tab feeling like she'd handled it for the year. That's the story most people tell themselves at the start of a plan year: I set the number, the number is now correct, the system will carry it out.

The number everyone believes, in other words, is that setting a contribution rate is the same as being on pace to hit the annual max. It is a comforting belief, and it is wrong for the overwhelming majority of people who hold it.

The number that flips it

Vanguard's How America Saves 2025 report, drawn from 2024 plan-year data, found that only 14% of 401(k) participants actually maxed out their contributions that year. Not 14% of low earners, or 14% of people without a plan at all. Fourteen percent of participants, meaning people who are already enrolled, already contributing, already doing the thing Bethany did in January.

That number only starts to make sense once you split it by income. Vanguard found 51% of workers earning $150,000 or more maxed out, compared with fewer than 1% of workers earning under $50,000. The intention to max out is broadly shared. The outcome is almost entirely determined by whether your paycheck can actually absorb the required withholding, which for most incomes, it structurally cannot without a mid-year correction.

Why setting the rate isn't the same as hitting the target

The reason this gap exists isn't mainly forgetfulness. Behavioral economists have a name for the January moment itself: the planning fallacy, the well-documented tendency to believe a plan made once, in a moment of good intentions, will execute itself the way it looked on paper, without accounting for how an actual year unfolds. The plan feels finished the moment it's set, which is exactly why almost nobody revisits it. Underneath that belief sits a mechanical fact about how payroll deferrals work that most people never have a reason to learn until they run into it: your 401(k) contribution is withheld as a percentage of each individual paycheck, and once a pay period is processed, that period's contribution, or shortfall, is locked in. There is no year-end mechanism that reaches back and tops off March's paycheck to compensate for a percentage that turned out to be too low. Guideline's own payroll help documentation states plainly that these elections must be made and the funds withheld before the employee receives that period's compensation; contributions "can rarely be reversed" once processed, and the same logic applies in the other direction to a shortfall.

That single mechanical fact is the whole reason a January contribution rate quietly drifts away from the annual target without anyone doing anything wrong. A raise arrives in April and the percentage doesn't get revisited. A bonus period changes the paycheck math for a month. A job change resets the withholding calculation entirely. None of these require a mistake. They just require six months to pass without a check-in, which is the default, not the exception.

A parallel, quieter version of the same gap sits in HSAs. EBRI's HSA database research found the average accountholder contributed roughly $926 below the self-only statutory maximum and roughly $4,576 below the family maximum in the most recent year it could confirm directly. An HSA has no employer-match urgency pulling attention toward it the way a 401(k) does, so this gap tends to persist even longer, unnoticed, next to whatever 401(k) shortfall is also quietly accumulating.

There's a real dollar cost layered on top of both gaps for anyone who isn't even capturing their full employer match: one widely cited estimate from 24/7 Wall St puts the average amount left on the table at just under $3,000 a year, and separate analysis covering millions of plan participants found roughly one in four workers miss their full match entirely, with the miss rate concentrated heavily among lower earners. That's a different problem from maxing out entirely, but it sits on the same mechanical foundation: a contribution percentage set once, in January, and never checked against what the paycheck actually needs to deliver.

The corrected decision rule

The fix isn't complicated, and it doesn't require reaching the theoretical statutory maximum to be worth doing. It requires one arithmetic check, done mid-year rather than at year-end: take the annual limit, subtract what you've already contributed year-to-date, and divide by the number of paychecks remaining. That per-paycheck number is what your current contribution needs to reach. If your current percentage falls short, raising it now still leaves five or six months of paychecks to close the gap. Waiting until an October or November check often leaves too few pay periods to reach the same target even at 100% of a paycheck, since most plans cap the percentage you can defer per pay period.

For 2026, the targets are worth having in front of you while you run this check: a $24,500 401(k) deferral limit (with an $8,000 catch-up at 50+, or $11,250 for ages 60 to 63), a $7,500 IRA limit, and HSA limits of $4,400 self-only or $8,750 family. Run the math against your own paychecks, not the abstract annual number, since the annual number alone doesn't tell you whether the paychecks between now and December can actually deliver it.

If maxing out entirely isn't realistic this year, the same mid-year check still answers a smaller but still valuable question: are you contributing enough, right now, to capture your full employer match, since that's real money forfeited permanently once the plan year closes. Our Roth vs. traditional 401(k) guide and HSA vs. FSA comparison cover the account-type decisions; this pace check is the arithmetic that determines whether either account is actually getting funded the way you intended. A Money Map scan can also show whether this particular gap outranks other financial priorities competing for the same dollars right now.

Bethany ran the numbers in July and found she was on pace to fall about $2,200 short by December. She raised her percentage that same afternoon, closing the gap with five months of paychecks instead of trying to compress it into the last two. The plan she made in January wasn't wrong. It just needed a second look partway through the year it was supposed to run on its own.

Sources

• Internal Revenue Service, Notice 2025-67, 2026 retirement plan contribution limits.
• Fidelity, HSA contribution limits, updated June 5, 2026, citing IRS Rev. Proc. 2025-19.
• Vanguard, "How America Saves 2025", covering 2024 plan-year data.
• EBRI, "New, Long-Term Analysis of HSA Usage", published March 28, 2024.

Bethany is a composite character; the IRS limits, Vanguard, and EBRI data cited are real. Figures referenced on this page were verified on July 18, 2026 and can change after publication. This article is educational information, not individualized financial advice.

Quick answers

Is it too late to fix a contribution shortfall if I check in July? Usually not. Five to six months of paychecks remain, which is typically enough to raise your percentage and still close the gap, unlike a shortfall caught in the final quarter of the year.

What's the fastest way to check my own pace? Subtract your year-to-date 401(k) contributions from the annual limit, divide by your remaining paychecks, and compare that number to what you're currently contributing per paycheck.

Should I prioritize maxing out over capturing my employer match? No. Capture the full match first; it's an immediate, guaranteed return that a maxed-out contribution elsewhere can't match. Only push toward the full statutory limit once the match is fully captured.