Costco's retirement benefit is the Costco 401(k) Retirement Plan, a $41.5 billion defined contribution plan. Employees can defer 1% to 50% of pay after 90 days. Costco matches 50% of deferrals up to $500 a year, then adds an annual company contribution of 4% to 9% of compensation after one year of service, fully vested immediately.
Key takeaways
- The headline match is small (max $500 a year), but the annual discretionary company contribution of 4% to 9% of pay is where the real money is: Costco deposited $662.4 million of it for the 2025 plan year, per the plan's SEC Form 11-K.
- Employer contributions are 100% vested immediately for anyone employed on or after August 1, 2024. The old five-year graded schedule no longer applies to active employees.
- Costco has no traditional pension. The 401(k), including its profit-sharing-style company contribution, is the entire employer-funded retirement benefit.
- Plan assets held roughly $18.3 billion of Costco stock at the end of 2025, about 44% of investments. The plan caps Costco stock at 50% of your account, and concentration that high deserves attention.
- For 2026, the IRS lets you defer $24,500, plus $8,000 catch-up at 50 or older, or $11,250 if you turn 60 through 63 during the year (IRS IR-2025-111).
How the Costco 401(k) works
The plan covers employees of Costco Wholesale Corporation and certain subsidiaries who are at least 18. You can start salary deferrals after 90 days of service within 12 consecutive months, and you can roll in balances from prior employer plans at any time.
Costco auto-enrolls newly eligible employees at a 4% deferral rate, then raises it by one percentage point on each employment anniversary up to 20%. You can opt out or change the rate, and you can defer anywhere from 1% to 50% of compensation up to the IRS limits.
Northern Trust Company is the plan trustee, T. Rowe Price Retirement Services is the recordkeeper, and the Costco Benefits Committee administers the plan. At December 31, 2025, the plan held $41.5 billion in net assets, up from $41.0 billion a year earlier, making it one of the largest 401(k) plans in American retail.
Match, company contribution, and vesting
Costco splits employer money into two pieces for non-union employees, and the smaller piece gets all the attention.
| Feature | Detail (per the FY2025 Form 11-K) |
|---|---|
| Employer match | 50% of your deferrals, capped at $500 per year |
| Annual company contribution | 4% to 9% of compensation, based on years of service |
| Company contribution eligibility | One year of service (12 consecutive months); entry on the first of the following month |
| Allocation condition | Must be employed on the last day of the plan year; deposited the following March |
| Vesting | Immediate, for participants employed on or after August 1, 2024 |
| Deferral range | 1% to 50% of pay; auto-enrollment at 4%, auto-escalation to 20% |
The $500 match cap looks stingy next to Walmart or Target. The discretionary contribution is the equalizer: a 10-year employee earning $60,000 at the top of the service scale can receive several thousand dollars a year without contributing anything beyond the first $1,000 that captures the match. Company-wide, that contribution came to $662.4 million for 2025 versus roughly $96.6 million of everything else, out of $759.0 million in total employer contributions.
Employees covered by the International Brotherhood of Teamsters agreements get a different formula: an annual employer contribution of $0.05 to $0.47 per straight-time hour worked (up to 2,080 hours), based on years of service. That contribution totaled $6.5 million for 2025.
One correction worth stating plainly, because it circulates in older write-ups: Costco does not offer a defined benefit pension. The company contribution inside the 401(k) functions like profit sharing, but there is no separate guaranteed-income pension plan.
Investments and the Costco stock question
If you make no election, your money defaults into the T. Rowe Price retirement trust matching your age. During 2025, Costco swapped its four Vanguard index mutual funds for lower-cost State Street collective investment trusts covering the S&P 500, U.S. bonds, global ex-U.S. equity, and small/mid caps.
The plan also offers Costco stock, and participants own a lot of it: $18.3 billion at the end of 2025, about 44% of the plan's investments at fair value. Costco shareholders have been rewarded for decades, which is exactly why so many long-tenured warehouse employees are 401(k) millionaires, and also why the plan imposes a 50% ceiling on Costco stock in any account. Holding your retirement and your paycheck in the same company compounds risk in both directions. Most employees sitting on large, appreciated positions should at least understand net unrealized appreciation treatment and diversification options before retirement; the retirement planning hub covers the mechanics.
Participants can borrow between $1,000 and the lesser of $50,000 or 45% of their vested balance, repaid by payroll deduction over up to four years (15 for a principal residence purchase).
2026 contribution limits
| 2026 limit | Amount | Source |
|---|---|---|
| Employee deferral (401(k)) | $24,500 | IRS IR-2025-111 |
| Catch-up, age 50+ | $8,000 | IRS IR-2025-111 |
| Catch-up, ages 60-63 | $11,250 | IRS Notice 2025-67 |
| Total annual additions (employee + employer, Section 415(c)) | $72,000 | IRS Notice 2025-67 |
| Compensation counted toward contributions (Section 401(a)(17)) | $360,000 | IRS Notice 2025-67 |
Two Costco-specific notes. First, because the match caps at $500, capturing it requires only $1,000 of deferrals; everything above that is your own tax-advantaged savings, so the case for maxing the deferral rests on the tax benefit rather than free money. Second, the 4% to 9% company contribution counts against the $72,000 total additions ceiling, not your $24,500 deferral limit, so heavy savers still have full deferral headroom.
On the way out: penalty-free withdrawals generally open at 59 1/2 (or on termination, disability, or death), and required minimum distributions begin at age 73 for people born 1951 to 1959 and at age 75 for people born in 1960 or later. Many long-tenured Costco employees also weigh a Roth conversion after separation to manage those future RMDs.
How Costco compares with other large retailers
| Employer | Match formula | Extra employer contribution | Vesting of employer money |
|---|---|---|---|
| Costco | 50% of deferrals, max $500/yr | 4%-9% of pay annually after 1 year | Immediate |
| Walmart | 100% up to 6% of pay, after 1 year | None | Immediate |
| Target | 100% up to 5% of pay | None | Immediate |
| Amazon | 50% up to 4% of pay (2% max) | None | 3 years |
Formulas as of 2026; competitor terms come from their plan disclosures and change periodically. For a percentage-of-pay match alone, Walmart and Target beat Costco. Add the discretionary contribution and Costco flips the table: a mid-tenure employee receives more employer money at Costco than the same earner would from a 6% match, and gets it without needing to contribute 6% of their own pay first. That structure favors exactly the lower-margin household budgets common in retail. Grocery competitors with union pension structures, such as Kroger, take a different path entirely, trading portability for defined benefits.
Timing matters more at Costco than elsewhere, though. The company contribution requires employment on December 31 of the plan year, so an employee planning an exit should generally not quit in November and forfeit a contribution worth up to 9% of that year's pay. The company also has no mandatory retirement age; how age interacts with benefits is covered in the Costco retirement age guide.
What this means for your planning
Costco's plan rewards tenure and patience: the service-based contribution scale, the last-day-of-year employment rule, and immediate vesting make it one of the strongest retail retirement packages even without a pension. Capture the match with $1,000 of deferrals, push your own rate well past the 4% default if early retirement is the goal, keep Costco stock below a level you could tolerate losing half of, and check the deposit each March to confirm your service tier was applied correctly. The plan document and annual Form 11-K, not secondhand summaries, are the final word on your specific terms.
Frequently asked questions
What retirement plan does Costco offer?
Costco offers the Costco 401(k) Retirement Plan, a $41.5 billion defined contribution plan with no traditional pension. Employees can defer 1% to 50% of pay after 90 days. Costco matches 50% of deferrals up to $500 a year, then adds an annual company contribution of 4% to 9% of compensation after one year of service, fully vested immediately.
How much does Costco contribute to your 401(k)?
Costco's real money is the annual discretionary company contribution of 4% to 9% of pay based on years of service, not the small $500 match cap. Costco deposited $662.4 million of that contribution for the 2025 plan year. A 10-year employee earning $60,000 at the top of the service scale can receive several thousand dollars a year without contributing beyond the first $1,000 that captures the match.
When does Costco 401(k) money vest?
Employer contributions are 100% vested immediately for anyone employed on or after August 1, 2024. The old five-year graded schedule no longer applies to active employees. One catch on timing: the company contribution requires employment on the last day of the plan year, so an employee should generally not quit in November and forfeit a contribution worth up to 9% of that year's pay.
How much Costco stock is in the 401(k) plan?
The Costco 401(k) held roughly $18.3 billion of Costco stock at the end of 2025, about 44% of the plan's investments. The plan caps Costco stock at 50% of any account. Costco shares have rewarded shareholders for decades, which is why many long-tenured employees are 401(k) millionaires, but holding your retirement and your paycheck in the same company compounds risk in both directions.
How does Costco's 401(k) compare to Walmart and Target?
For a percentage-of-pay match alone, Walmart (100% up to 6%) and Target (100% up to 5%) beat Costco's $500 cap. But adding Costco's 4% to 9% discretionary contribution flips the table: a mid-tenure employee receives more employer money at Costco than the same earner would from a 6% match, and gets it without needing to contribute 6% of their own pay first.