Saving for retirement is crucial at any age, but for homeowners over 50, having sufficient funds becomes even more essential. This is particularly true as they approach retirement.
In 2026, investors will be able to defer contributions of up to $24,500 in their 401(k) plans, an increase from $23,500. Overall contributions, including employer contributions, can total $72,000.
If you’re 50 or older, you can contribute an additional $8,000 in 2026 in catch-up contributions, and those aged between 60 and 63 can add $11,250.
It’s wise to make the most of your 401(k) yearly since it offers various benefits for homeowners. If retirement is in your near future—let’s say within the next decade—you might want to focus on your 401(k), especially if you’re looking to stay in your home post-retirement.
Benefits for Homeowners Maximizing Their 401(k)
According to data from mid-2025, the average 401(k) balance for individuals in their 60s stood at $568,040. This figure is marginally lower than the average for those in their 50s, which was $607,055, possibly because many in their 60s have retired and begun withdrawing funds.
Financial experts urge homeowners to bolster this retirement account due to its unique advantages.
“A 401(k) not only improves your financial standing but also helps you maintain homeownership,” states Katrina Martin, CPA and founder of Wow Tax & Advisory Service.
“Even if you don’t contribute the maximum, you’re still likely to see money grow in your account. Taxes hit every part of your paycheck—federal, state, Social Security, and Medicare. So, it makes sense to keep your earnings and allow them to accumulate,” she explains.
“Since 401(k)s are funded with pre-tax dollars, maxing this out can save you a significant amount on federal and state income taxes each year. This can mean savings for expenses like maintenance, repairs, insurance, and homeowners association fees,” adds Armin Arazian, CPA and founder of Arajan Group Co., Ltd.
Understanding the Tax Season Calculations
To grasp the impact of maximizing your retirement savings, consider this example:
Imagine a 50-year-old single homeowner in New Jersey earning $125,000 annually. They purchased their home in 2005, took out a mortgage at a 6% rate with a 20% down payment, and pay $10,500 in property taxes each year.
Given that New Jersey has the highest property tax rate nationwide and that the SALT deduction is capped at $10,000, losing this deduction alongside other itemized deductions will not significantly lower your federal taxable income.
However, if you maximize contributions to your 401(k) in 2026 with $24,500 plus an $8,000 catch-up, totaling $32,500, you can decrease your taxable income from $110,400 down to $77,900. With a 22% marginal tax rate, this results in a tax reduction of around $7,100, helping to mitigate New Jersey’s high property taxes without diminishing your home equity or available cash.
Long-Term Benefits of Maxing Out Your 401(k)
As homeowners approach retirement, questions about maintaining a consistent income begin to emerge. They may wonder how they’ll cover property taxes, repair the roof, or even make their last mortgage payment.
This is where the advantages of maximizing your 401(k) really stand out.
If you commit to contributing $32,500 yearly for the next 15 years and assume a 6% annual return, you could accumulate around $756,000 by age 65, just two years shy of standard retirement age.
This total reflects contributions of $487,500 and investment growth of about $269,000, all of which would be tax-deferred.
This significant savings, coupled with home equity, can provide a solid financial cushion for your retirement. By 2035, if you haven’t refinanced, you’ll have less financial strain, assuming you’re mortgage-free.
Moreover, this estimate doesn’t account for employer contributions or future increases in contribution limits.
If you find yourself still having a mortgage and facing financial difficulties, your 401(k) could be the salvation needed to preserve your home.
“In case of a financial hurdle and the threat of foreclosure, you can tap into your 401(k),” Martin continues. “While it’s advised to keep this untouched until retirement, it’s reassuring to know it’s an option when absolutely necessary.”
