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 free money to help your 401(k) balance grow.
That said, maybe your employer doesn't offer a match, or maybe 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 $24,500 in 2026. People aged 50 and older can contribute an extra $8,000 as a catch-up contribution. Due to the Secure 2.0 Act, those aged 60, 61, 62 and 63 get a higher catch-up contribution of $11,250.. Employers can also contribute to their employee 401(k) plans.
It is possible to add even more to a 401(k) plan through after-tax contributions. However, whether you can do this this depends on your plan rules.
» Learn more: How the 401(k) contribution limit works
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How much should I contribute to a 401(k)?
The annual limit dictates how much you can contribute, but it doesn't offer any guidance on how much you should contribute, or even if you should max out your 401(k).
Your retirement savings goals should guide your 401(k) contribution amount.
- Estimate your needs: Some experts recommend saving enough to replace about 80% of your preretirement income when you retire. 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 retirement benefits. You can create your own estimate for how much you need for retirement or work with a financial advisor 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 free money on the table. 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.
» MORE: Try our retirement calculator
An IRA might be a better (or additional) option for retirement savings
Some 401(k) plans, typically at large companies, offer access to investments with very low expense ratios. That means those investments might be cheaper inside your 401(k) account than in another investment account.
However, that may not always be the case. Small companies can't negotiate for low-fee funds the way that large companies can. And if your 401(k) plan doesn't have a wide selection of investments, your options may be limited.
Whether you want to invest additional cash beyond your employer match, or you don't receive a match and want a different place to start saving for retirement, consider individual retirement account (IRA). These are the two most popular and can be opened by anyone with earned income:
- The traditional IRA, which offers a tax break upfront for contributing.
- The Roth IRA, which offers a tax break for withdrawals in the future during retirement.
With an IRA, you can choose your own provider. This allows you more investment and cost options compared to a 401(k) plan. However, the IRA contribution limit is much lower — $7,500 for 2026 ($8,600 if aged 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 — deciding whether to contribute to your 401(k) is all about those fees. If the fees are high, consider directing additional dollars to an IRA.
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- 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.
- A Roth 401(k) plan takes after-tax dollars, but distributions in retirement are tax-free — you never pay taxes on investment growth.
- If your employer doesn’t offer a Roth 401(k), you may want to contribute to a Roth IRA after you’ve achieved your 401(k) match. This can help build some tax-free income in retirement.
- In general, money you contribute 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, consider going back to the 401(k) and continuing your contributions there.
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