How 401(k) and HSA Contributions Change Your Take-Home Pay
Saving for retirement feels expensive when you look at the contribution amount. But because pre-tax money skips income tax, your paycheck drops by noticeably less than what you put in. The difference is the government’s share, and you get to keep it.
A quick example
Take someone earning $70,000 a year in Georgia, single, paid every two weeks.
| No savings | 6% to 401(k) | 6% 401(k) + $2,000 HSA | |
|---|---|---|---|
| Contributions per year | $0 | $4,200 | $6,200 |
| Take-home per year | $55,331 | $52,194 | $50,687 |
| Take-home per paycheck | $2,128.10 | $2,007.46 | $1,949.50 |
Putting $4,200 into the 401(k) lowers take-home pay by only $3,136. The other $1,064 is federal and Georgia income tax they no longer pay. That’s roughly a 25% discount on saving.
Adding $2,000 to an HSA through payroll costs them only $1,507 in take-home pay. HSA money is even better because it also skips Social Security and Medicare tax.
2026 contribution limits
| Account | 2026 limit |
|---|---|
| 401(k), 403(b), most 457 plans | $24,500 |
| Catch-up, age 50 and older | +$8,000 |
| Extra catch-up, ages 60 to 63 | +$11,250 instead of $8,000 |
| HSA, self-only coverage | $4,400 |
| HSA, family coverage | $8,750 |
| HSA catch-up, age 55 and older | +$1,000 |
| Health care FSA | $3,400 |
| IRA | $7,500 |
One new rule for 2026: if you earned more than $150,000 in wages from your employer last year, any catch-up contributions have to go in as Roth money rather than pre-tax.
What each one skips
Not all pre-tax deductions are equal, and this is where people get confused.
- Traditional 401(k), 403(b) and 457: skip federal income tax and, in most states, state income tax. Pennsylvania taxes all of them, and New Jersey taxes 403(b) and 457 contributions (401(k) money is excluded there). You still pay Social Security and Medicare on the money.
- HSA through payroll, health premiums, and FSAs: skip federal income tax, state tax in most states, and Social Security and Medicare. California and New Jersey are exceptions for HSAs; they tax them at the state level. New Jersey also taxes health premiums and FSA money taken out through a cafeteria plan.
- Roth 401(k): doesn’t reduce your taxes now at all. You pay tax today and the money grows tax free for retirement.
Traditional or Roth?
There’s no single right answer, but here’s a reasonable way to think about it:
- If you’re in the 10% or 12% bracket now and expect to earn more later, Roth is often the better deal. You pay tax while your rate is low.
- If you’re in the 22% bracket or higher, traditional contributions give you a bigger break now, and many people end up in a lower bracket in retirement.
- Not sure? Splitting between the two is a perfectly good choice.
Whatever you pick, contribute at least enough to get your full employer match if you have one. That’s an instant return you won’t find anywhere else.
Watch your take-home, not just the percentage
It’s easy to bump your contribution to 10% or 15% and then feel squeezed a month later. Before you change it, plug the new percentage into the paycheck calculator and look at the per-paycheck number. If you can live on that amount, go for it. If not, try raising your contribution by 1% each year instead, ideally timed with a raise so your take-home never actually drops.