How Much Should You Contribute to Your 401(k)?
There's no single right number, but a clear order of priorities helps you decide how much of your paycheck to direct into your 401(k). Follow these steps in order.
Step 1: Contribute enough to get the full match
If your employer matches contributions — say, 100% up to 4% of salary — contribute at least that much first. The match is an immediate, guaranteed return on your money. Skipping it is leaving free compensation on the table.
Step 2: Aim for 15% of gross income
A widely used rule of thumb is to save about 15% of your pre-tax income for retirement, including any employer match. If you start in your 20s or early 30s, this rate gives compound growth decades to work. Starting later may call for a higher rate.
Step 3: Work toward the annual limit
Higher earners aiming for an earlier or more comfortable retirement can push toward the IRS annual contribution limit, which is adjusted periodically. Check the current year's limit, since it changes with inflation, and note the additional catch-up amount allowed at age 50 and older.
What if money is tight?
- At minimum, contribute enough to get the full employer match.
- Increase your rate by 1% each year or with every raise — you'll barely notice it.
- Build a small emergency fund alongside so you're not forced to tap retirement savings.
Traditional vs Roth contributions
Traditional 401(k) contributions lower your taxable income today and are taxed in retirement; Roth contributions are made after tax and grow tax-free. Many savers split between the two. Your choice depends on whether you expect a higher or lower tax rate in retirement.
Ready to run the numbers? Try our Retirement & 401(k) Calculator.