Short answer: a common starting target is to contribute about 10–15% of your gross (pre-tax) income to your 401(k), especially if you’re aiming to capture any employer match and you’re early in your career. If you can, 15% is a common goal that includes any employer match and any personal contributions, helping you reach a more robust retirement balance over time. However, the right number depends on age, current finances, debt, and retirement goals. Factors to tailor your contribution
- Employer match: Contribute enough to capture the full match if offered. This is essentially free money and accelerates your savings.
- Age and time horizon: The earlier you start, the more you benefit from compounding; younger workers can often start closer to 10–12% and ramp up later.
- Budget and debt: Ensure essential living expenses, debt payments, and emergency savings are in place before maximizing contributions.
- Retirement goals: Higher target lifestyles require larger savings; modest goals may fit within 10–12% if other assets and Social Security are planned.
- 401(k) limits: Be mindful of annual contribution limits set by the IRS (these adjust with inflation). If maxing out is feasible, you can increase toward the limit over time.
Practical steps
- Find your employer match details. If they match 50% up to 6% of salary, aim to contribute at least 6% to capture the full match, then consider raising to 10–15%.
- Create a gradual increase plan: raise your contribution rate by 1–2 percentage points each year or after salary increases.
- Revisit annually: adjust your contribution after raises, promotions, or changes in financial circumstance.
Common guidance sources (for reference)
- Fidelity suggests aiming to save about 15% of pretax income for retirement, including employer contributions. This typically includes any employer match and IRA contributions if applicable.
- Many financial outlets recommend 10–15% as a practical target, with adjustments based on age, debt, and goals.
- If unsure, starting at 10% and increasing to 12–15% over time is a widely used, sensible approach.
If you’d like, share:
- your current annual salary (or rough range)
- whether your employer offers a 401(k) match and the match formula
- any debt or essential monthly expenses that affect savings
- your age or approximate years to retirement
I can then tailor a specific contribution target and a step-by-step plan to reach it.
