The IRS caps your own 401(k) deferral at $24,500 for 2026, but contributions from all sources can reach $72,000. If your plan allows after-tax contributions plus an in-plan Roth conversion or in-service distribution, much of that gap can be moved to Roth each year, with no income limit. Converting promptly keeps the taxable earnings small. Everything depends on your plan document, and highly compensated employees face annual testing that can refund contributions.

Company stock grants come in several forms, and each has its own rules for when you receive value and when taxes are owed. NSOs, RSUs and PSUs generally create ordinary income when exercised or delivered, while ISOs and ESPP shares can qualify for long-term capital gains treatment if holding periods are met, though ISOs may trigger the AMT. Vesting schedules and blackout periods shape when you can act, and accumulating grants can tie both your income and your savings to one company.

When employer stock inside a 401(k) is distributed in-kind as part of a qualifying lump-sum distribution, the growth above cost basis is taxed at long-term capital gains rates when sold rather than as ordinary income. A triggering event is required first. The cost basis is taxed as ordinary income at distribution, and the shares lose tax-deferred growth. The benefit is largest when the stock is highly appreciated and the holder is in a meaningful income tax bracket.