How Much Should I Contribute to a 401(k)?

When planning your 401(k) contributions, most financial pros will say that the first priority is to contribute at least enough to earn your employer match, if offered. That ensures you don't miss out on any free money to help your 401(k) balance grow.

That said, maybe your employer doesn't offer a match, or you want to contribute more than the match. Here's how you can figure out how much to set aside in your 401(k).

How much can I contribute to a 401(k)?

The IRS sets an annual contribution limit for retirement accounts, including 401(k) plans. The most you can contribute to a 401(k) is $23,500 in 2025. People age 50 and older can contribute an extra $7,500 as a catch-up contribution. Due to the Secure 2.0 Act, those ages 60, 61, 62 and 63 get a higher catch-up contribution of $11,250. Employers can also contribute to their employee 401(k) plans, up to $46,500 in 2025.

» Learn more: How the 401(k) contribution limit works

While the IRS has contribution limits for 401(k) plans, it is possible to add even more to a 401(k) plan through after-tax contributions. However, whether or not you'll be able to do this this will depend on your plan provider's rules.

How much should I contribute to a 401(k)?

While the annual limit dictates how much you can contribute, it doesn't offer any guidance on how much you should contribute, or even if you should max out your 401(k).

Given that contributing to your 401(k) requires money and may be an ongoing, year-after-year commitment, it's important to be aware if the amount is enough to fund your retirement, or if it could be even more than you need. For that reason, your 401(k) contribution amount should be guided by your retirement savings goal.

• Estimate your needs: Some experts recommend planning to replace about 80% of your preretirement income for your golden years. In reality, how much money you may need depends on when you plan to retire, how much of your current income you’d actually like to replace and how much you want to rely on Social Security. You can create your own estimate for how much you need for retirement or work with a financial planner to get help with more complicated goals.

• Consider the 15% rule: Contributing enough to hit your employer match, if offered, can help ensure you're not leaving any free money on the table. If you're ready to crank up your savings, many financial pros urge savers to consider allocating 10% to 15% of their income to 401(k) contributions during their working years, but this is just a guideline. You can start at a lower contribution and work your way up over time, around 1% or 2% each year.

» Curious about how your contributions will play out in the long run? Try our retirement calculator

An IRA might be a better (or additional) option

While contributions to your 401(k) plan are a crucial way to grow your account, it isn't the only consideration. Other factors, such as fees and investment selections, also matter.

Some 401(k) plans, typically at large companies, have access to investments with very low expense ratios, making those investments cheaper compared to if you were to invest in the same products outside of your 401(k) plan. In other cases, the opposite is true; small companies generally can’t negotiate for low-fee funds the way large companies may be able to. And because 401(k) plans offer a small selection of investments, you’re limited to what's available.

If you're already contributing up to your employer match and want to invest additional cash, or if you don't have an employer match and want another place to start, you can consider an individual retirement account (IRA). It comes in two forms: the traditional IRA, which offers a tax break upfront for contributing, and the Roth IRA, which offers a tax break for withdrawals in the future during retirement.

With an IRA, you can choose your own provider, allowing you more investment and cost options compared to a 401(k) plan. However, the IRA contribution limit is much lower — $7,000 in 2025 ($8,000 if age 50 and older) — so if you max that out but want to continue saving, go back to your 401(k).

Let’s be clear: While fees are a bummer, matching dollars from your employer outweigh any fee you might be charged. But once you’ve contributed enough to earn the full match — or if you’re in a plan with no match at all — the decision of whether to continue contributions to your 401(k) is all about those fees. If the fees are high, direct additional dollars over the match to a traditional or Roth IRA.

» Ready to get started? Find the best IRA account for you

401(k), IRA, Roth: Know the tax impact

With a traditional 401(k), your contributions come out of your paycheck pretax, but distributions in retirement are taxed as income. That means your money grows tax-deferred. Some 401(k) providers also offer a Roth 401(k) plan, which takes after-tax dollars, but distributions in retirement are tax-free — you never pay taxes on investment growth.

The difference between a Roth and a traditional IRA is the same. If your employer doesn’t offer a Roth version of a 401(k), you may want to start contributing to a Roth IRA after you’ve achieved your 401(k) match to build some of that tax-free income in retirement.

In general, money contributed to a Roth account is more valuable in retirement because you’re not handing a portion of every distribution to the IRS. If you max out that Roth IRA and need to continue saving, go back to the 401(k) and continue contributions there.