How much should I contribute to my 401(k)?
At minimum, contribute enough to get your full employer match (free money — typically 3–6% of salary). Ideally, contribute 15–20% of gross income to retirement accounts total (401k + IRA). The 2024 401(k) limit is $23,500 ($31,000 if you're 50+).
Formula
Minimum = enough for full employer match. Target = 15–20% of gross income across all retirement accounts.
Example
Salary $100k, employer matches 100% up to 4%. Minimum: $4,000 (4%) → gets $4,000 match = $8,000/year. Target: $15,000–$20,000 total (including match). Max: $23,500 + $4,000 match = $27,500/year.
How it works in detail
The contribution priority order: (1) Get full employer match, (2) Max Roth IRA ($7,000), (3) Increase 401k toward max. If your employer matches 50% up to 6% of salary, contributing 6% gives you 3% free. On $100k salary that's $3,000/year in free money. At 7% returns for 30 years, just the match alone compounds to $283,000. Going beyond the match depends on your tax bracket: in 22%+ brackets, Traditional 401k contributions are powerful because you save 22+ cents per dollar now. In the 12% bracket, Roth contributions may be better.
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How much do I need to retire?
Multiply your annual spending by 25. If you spend $60,000/year, you need $1,500,000. This is the 4% rule from the Trinity Study (1998) — withdraw 4% annually with a 95%+ historical success rate over 30 years.
Should I choose Roth or Traditional IRA?
Choose Roth if you expect higher taxes in retirement (younger, income will grow, or tax rates rise). Choose Traditional if you're in a high bracket now and expect lower taxes later. For most accumulating workers under 50 in the 22–24% bracket, Roth is preferred because of tax-free growth and no Required Minimum Distributions.
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