Manulife John Hancock Retirement Publishes 2026 Article Explaining What a 401(k) Plan Is and How It Works

BOSTON, October 05, 2026. Manulife John Hancock Retirement has published an updated participant education article that answers a foundational retirement planning question: “What is a 401(k) plan?” The article explains 401(k) plans and highlights practical considerations that can help participants use this retirement savings benefit more effectively.

The 2026 article to understanding a 401(k) plan covers automatic payroll contributions, traditional and Roth tax treatment, employer matching contributions, compound growth, annual IRS contribution limits, and common investment options. Together, these topics help give participants a clear overview of both how a 401(k) works and the decisions they may encounter as they save for retirement.

A 401(k) can be one of the most important tools available to workers building retirement savings, Our updated[EJ1] article brings the essential information together in one place so participants can better understand their plan, make informed contribution decisions, and take full advantage of the benefits their employer offers.

How a 401(k) plan works

A 401(k) is an employer-sponsored retirement savings plan that allows employees to direct a portion of each paycheck into an account and invest those contributions using options available through the plan. Contributions are made automatically through payroll, helping participants save consistently over time. Because a 401(k) is intended for retirement, taxes and penalties may apply to certain withdrawals made before age 59½.

Traditional and Roth contributions

The article also explains the difference between traditional and Roth 401(k) contributions. Traditional contributions are generally made before taxes and can reduce taxable income in the year they are made, while taxes are typically paid when money is withdrawn in retirement. Roth contributions are made after taxes, but qualified withdrawals are generally free from federal income tax. The appropriate approach depends on each participant's circumstances and expectations, and some participants may choose a combination of both.

To illustrate the potential effect of tax deferral, the article includes a hypothetical example in which an individual starts with $10,000, contributes $1,000 annually for 20 years, and earns an average annual return of 8%. Under the assumptions shown, the tax-deferred 401(k) finishes with approximately $23,000 more than a comparable taxable account. The example is illustrative, does not reflect the performance of any investment, and does not guarantee future results.

Employer matching can add to participant savings

Many employers match a portion of participant contributions. The article uses a common formula, a 100% match on the first 6% of pay, to demonstrate how the benefit may work. For an employee earning $60,000, contributing 6% would equal $3,600. If the employer matched that full amount, total annual contributions would reach $7,200. The example reinforces why participants may want to understand their plan's specific matching formula and, when feasible, consider contributing enough to receive the full available match.

2026 contribution limits and investment choices

Manulife John Hancock retirement article summarizes the 2026 employee contribution limits: $24,500 for participants under age 50; up to $32,500 for participants age 50 or older who are eligible to make the standard catch-up contribution; and up to $35,750 for participants ages 60 through 63 if their plan offers the higher SECURE 2.0 catch-up contribution. A separate limit applies to total employee and employer contributions.

Participants can also learn about investment options that may be available through a workplace plan, including target-date funds, target-risk funds, default investments, and managed accounts. The article explains how these options differ and why time horizon, comfort with investment risk, plan features, and cost can matter when choosing an approach.

Read the complete 401(k) article

The complete article, including answers to frequently asked questions about contribution amounts, employer matching, and traditional versus Roth contributions, is available on the Manulife John Hancock Retirement education platform: Read “What is a 401(k) plan?”

This content is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made.

About Manulife John Hancock Retirement

Manulife John Hancock Retirement is the U.S. retirement business of Manulife Investment Management. For more than 50 years, John Hancock has helped people plan and invest for retirement; today, we're one of the largest full-service providers in the United States.1 We take a hands-on consultative approach based on the idea that no two plans—and no two plan participants—are exactly alike. We partner with plan sponsors, advisors, and third-party administrators to ensure that every plan is personal to the participant and delivers proven results.¹

1"PLANSPONSOR 2025 Defined Contribution Recordkeeping Survey© 2025 Asset International, Inc.,” PLANSPONSOR, 2025.