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

Deciding how much to contribute to your 401(k) is a personal decision—but it’s one of the most important financial choices you can make. The good news? Even small contributions can grow significantly over time thanks to tax advantages and compound interest.

Each year, the IRS sets limits on how much you can contribute:

• 2025 Employee limit: $23,000

• Catch-up contribution (age 50+): Additional $7,500

• "Super Catch-Up" contribution (ages 60, 61, 62, or 63 in the taxable year starting in 2025): $3,750

• Employer contributions don’t count against your personal limit, but the combined total from you and your employer can’t exceed $69,000 ($76,500 if age 50+ or $80,250 if super catch-up eligible)

You don’t have to contribute the maximum—but understanding the cap helps you set realistic goals.

If your employer offers a matching contribution, this is the first place to focus. It's essentially free money added to your retirement account.

Example:
Your employer matches 100% of the first 4% you contribute. If you earn $60,000, that’s:

• Your 4% = $2,400/year

• Employer match = $2,400/year

• Total added to your account: $4,800/year

Contribute at least enough to get the full match—not doing so is leaving free money on the table.

A good starting point for most people is 10% to 15% of pay, including the employer match. But if you’re just getting started, even 3% to 6% is a solid beginning.

Many plans offer:

• Automatic escalation: Your contribution percentage increases annually (e.g., by 1%) until it reaches a target.

• Flexible changes: You can raise or lower your contributions anytime through your 401(k) portal.

Tip: Increase your contributions when you get a raise or bonus—it’s money you’re not used to spending yet.

Contributing more to your 401(k) reduces your take-home pay—but also reduces your taxable income if you’re using pre-tax contributions.

Ask yourself:

• Can I afford this level of contribution and still meet essential expenses?

• Am I building an emergency fund and paying off high-interest debt too?

• Do I have other savings goals (e.g., home, college, travel) to balance?

You don’t have to save for retirement all at once. Start where you can and build over time.

NestEggs offers free tools like the Financial Learning Center and My Retirement Progress that show how your current contributions could grow over time and whether you’re on track to meet your goals. Access these free tools in your online NestEggs account.

Use them to:

• Set a retirement income target

• Model the impact of increasing your contributions

• Understand how investment returns affect your savings

• Contribute at least enough to get your full employer match

• Aim for 10–15% of your income over time (including employer match)

• Increase your contribution gradually, especially after raises

• Reassess annually or after major life changes

• Use online tools or consult a financial advisor for help

Saving for retirement doesn’t have to be overwhelming. Start small if you need to—but start. Every dollar you contribute today moves you closer to financial independence tomorrow.