What percentage of my salary should I save in my 401k?

What percentage of my salary should I save in my 401k?
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What percentage of my salary should I save in my 401k?


Curt has a great answer..."it depends"...a good standard I consider is to contribute enough to receive any employer matching funds available in your plan.  This is "free money" to you, helping leverage your investment for your retirement.

Curt also started a conversation by mentioning the Roth IRA.  If your employer has a Roth 401(k) option, you should seriously consider utilizing that component for your contributions. This allows you to tax diversify, while also receiving the matching funds from your employer!

The best advice, however, is to balance your saving with your overall financial situation.  Do not let your retirement savings leave you without an Emergency Fund or a Cash Reserve! Taking a loan from a 401(k) or early distributions from an IRA should be last resorts, not a cash reserve strategy.

Consult with a tax specialist to determine if the Roth option fits within your situation, and include an investment adviser or financial planner locally for diversification and fund selection!  


You should invest as much as you feel you can afford, if you want to maximize your retirement planning successfully.  However, you should also take into consideration that you make sure you have enough in emergency funds and shorter term goals financed with other savings, so that you don't have to borrow or use any of it before you retire.  You should definitely make sure you at least contribute as much as your employer matches, since that is a guaranteed return on the match, whether it is 50% or 100%.  Does your employer provide a ROTH 401k option?  That is another option to seriously consider if you are young and could benefit from years of compounding your contributions tax-free vs tax-deferred for regular 401k contributions till you withdraw funds from your regular 401k.


I totally agree with the other three advisers and their answers.  I want to give you an example that hopefully makes it easier to understand why you should invest in your employer 401-k.  Basically you will double or triple your investment!  Let's say your employer has a 3% match.  If you contribute 3% of your salary (before taxes) the company gives you another 3%.  That's the obvious you doubled your "investment net worth" before taking any market risk. 

Now lets work on that triple your money aspect!  Lets assume you are in a combined 33% incremental state & federal tax rate.  So if you did not participate in the 401-k plan the 3% of income you included in your taxable pay check would have given you an additional 2% of tax home pay.  That's because you had to pay 33% taxes on the 3%, thus leaving you 2% in take home pay.  Thus, the 2% take home pay, if excluded from your paycheck and the entire 3% (2% take home plus 1% tax) is added to your 401-k account and matched with a company 3% match is now 6% and is a triple your tack home money!  The 2% take home pay is now worth 6% in your 401-k account before investing.  Where else can you triple your money risk free!  Do it!


Assuming you are saving for retirement, I generally suggest a three step approach to investing and contributing to a 401(k): 

(1) invest in your 401(k) to the full extent of your employer match 

(2) contribute the annual max to a Roth IRA if you are eligible, and 

(3) go back to investing in your 401(k) up to the annual max. 

If your employer does not offer a 401(k) match, skip step 1, and if you are not eligible for a Roth IRA, skip step 2.  

Obviously, saving for retirement is healthy, but it's also important to ensure that your cash flow is sufficient to cover your ongoing living expenses. 


It appears you are looking for a universal rule of thumb, and there is no such thing.  It is often suggested that people who save 10% of their salary throughout their career will be well positioned for retirement. I tend to agree, with caveats.  (some say the number should be 15%).  But how much YOU should save depends.  If you are 45 years old and have never saved before, YOUR number will be much higher because you have lost ground to make up.  If you have a generous employer pension (there are still a few) - then your number will be less than someone who needs to rely entirely on their own savings. 

"Saving as much as you can afford" can be good advice, but leaves open the possibility of a "cop out".  If you really should be saving 15% of your salary, but are unwilling or unable to make the necessary lifestyle adjustments, it is then too easy to say "I am only saving 5% - but its ok because it is as much as I can afford". 

Best bet is to spend a little time with a Certified Financial Planner(tm) to talk about your lifetime financial plan, then make decisions based on an objective and permanent plan.

Another useful guideline was developed by Fidelity.  It said a person should have saved 1 times salary by the time they are 30, 3 times by 40, 5 times by 50, and 10 times salary by the time they retire.  It is an intesting rule of thumb (as with most such rules, there are limits to its usefulness)


Whatever percentage it takes to save the amount required to reach your goals.  In other words, the amount has to be determined by looking at it in the context of your overall planning.  You may need to save more each year than someone earning the same amount with the same retirement income need simply because you have a lower financial risk tolerance and therefore need to invest more conservatively.

Be careful with rules of thumb and averages.  The average depth of the Chesapeake Bay is 4 feet.  That is interesting info but is useless, even dangerous, for the person trying to navigate its waters.


As much as you think you can comfortably afford and then do more, especially if you are a woman. 

Aon Hewitt, which looked at more than 140 defined contribution plans, says that while the average man’s 401(k) balance at the end of 2012 hovered around $100,000, the average woman had amassed just $59,300. 

Ask yourself, "Would I rather spend $250 on a purse today or invest the money and be able to afford two purses in 9 years?"  The next time you want to go shopping just for fun, skip it and put the money you would have spent into your 401(k), Roth IRA, or Traditional IRA.  This is what I said on Fox 5 News: http://t.co/3T52hZEjd9

Figure out how to distinguish your "wants" from your "needs."  Make it hurt just a little...you can still enjoy your life.  


Since you did NOT mention your age, the answer is theoretical. But in general - if you are between 30-35 - 15%. If you are 35-40 18% and if you are over 40, you need to be saving 20%. These percentages will get you near 20 times your current income plus inflation when you 70 IF and this is the key, you can earn 7% on your portfolio. Send more info, and we can be a lot more specific.


If your employer offers a match to your contribution, say 1% on contributions up to 5% of salary, then 5% of salary is the floor you should consider. The idea is to contribute enough to meet the most your employer will match.
Next, contribute as much as allowable to your IRA. If there is still money in the budget after these contributions, then you can increase the percentage of your 401(k) contribution as high as you can afford, but not to exceed the annual contribution limits based on your age.
It is also a good idea to find a financial professional who can help you do some long range planning and run “what if’s” to be sure your after tax savings are compounding at the rate you want/need to support retirement.
Hope this has helped.


At least enough to get your full match. After that, you have the choice to contribute more, change to a Roth IRA, set up an “after tax” account, or beef up your emergency fund, pay off debt, save for a house, etc. It all depends upon your short- and long-term goals, which form the framework of your personal financial plan.
In general, I recommend saving 20% of your gross salary, including employer matching funds. The 20% does not necessarily need to be in your 401k, however. For personal advice, consider working with a fee-only financial planner. XY Planning Network http://www.xyplanningnetwork.com/ members specialize in X/Y/millennial generation planning and is a great place to start your search (disclosure: I am a member).
Good luck and I hope this helps!


Put in at least enough to get the full company match. Then contribute more if you can afford to do so.


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