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

There is no single correct answer. The right contribution rate depends on your income, expenses, debt, other savings, and how far you are from retirement. This article explains the limits that apply, the factors worth weighing, and the tools available to you.

If your plan provides a matching contribution, the match formula sets a natural first reference point. Contributing below the level your plan matches means your employer contributes less than it otherwise would.

Example. A plan matches 100% of the first 4% of pay you contribute. On a $60,000 salary:

• You contribute 4%, or $2,400 for the year

• Your employer matches $2,400

• $4,800 goes into your account

Two qualifications:

Vesting. Employer contributions may be subject to a vesting schedule. If you leave before you are fully vested, you forfeit the unvested portion. Your own contributions are always fully yours. Check your SPD for your plan's schedule.

How the match is calculated. If your plan calculates the match each pay period rather than on full-year pay, contributing heavily early in the year and then stopping can reduce your total match. Some plans correct for this at year end and some do not.

Not all plans provide a match. Check your SPD.

The IRS adjusts these limits every year.

2026 limits

Four points participants commonly get wrong:

The contribution limit is yours, not your plan's. The $24,500 limit applies to you across every employer plan you participate in during the year. If you change jobs mid-year, contributions to both plans count toward the same limit. Neither employer can see the other's total. If you exceed the limit, contact us promptly. Correcting an excess deferral has a deadline in the following year, and missing it has tax consequences.

Your plan may cap you below the IRS limit. Some plans limit deferrals to a set percentage of pay. Check your SPD.

Nondiscrimination testing can limit highly compensated participants. If your plan does not use a safe harbor design, annual testing may require that a portion of your contributions be refunded to you. If this affects you, we will notify you.

Catch-up contributions may have to be Roth. Beginning in 2026, if your prior-year FICA wages from your employer exceeded the IRS threshold, all of your catch-up contributions must be made on a Roth basis. This is federal law, not a plan choice. Catch-up contributions also require that your plan permit them.

You will encounter general rules of thumb in retirement planning material, most often a target of 10% to 15% of pay including any employer contributions.

Treat these as reference points, not as recommendations. They rest on assumptions that may not match your situation, including the age you start saving, your retirement age, your other retirement income, your investment returns, and what share of your current income you will need in retirement. Someone starting at 25 and someone starting at 50 do not face the same math.

What a benchmark is useful for is comparison. Run your own numbers against it using the tools described below, or with a financial advisor.

If your current budget does not support the rate you are aiming for, most plans allow you to raise it later.

• Automatic escalation. Many plans increase your contribution rate by a set amount each year, often 1%, up to a cap. If your plan offers it and you are not enrolled, you can usually opt in through your online account.

• Manual changes. You can change your rate through your NestEggs account. Some plans limit how often changes can be made or restrict them to specific dates.

A common approach is to increase your rate when your pay increases, so the change does not reduce your current take-home pay.

Contributing more reduces your take-home pay. Pre-tax contributions reduce your federal taxable income in the year contributed; Roth contributions do not. Both are still subject to Social Security and Medicare tax.

Questions worth working through before setting a rate:

• Can you cover your essential expenses at this contribution level?

• Do you have an emergency fund?

• Do you carry high-interest debt?

• Do you have other savings goals competing for the same dollars?

• Will you need access to this money before retirement? Money in a 401(k) is generally not accessible without a distributable event, and early distributions may carry taxes and penalties.

Your NestEggs account includes planning tools that let you model different contribution rates and estimate your projected retirement income.

These tools produce hypothetical projections based on assumptions you and the tool provide, including an assumed rate of return. Projections are estimates, not predictions. Actual results will differ, and investment returns are not guaranteed.

• Find your plan's match formula and vesting schedule in your SPD

• Confirm whether your plan caps deferrals below the IRS limit

• Set a rate you can sustain

• Consider automatic escalation if your plan offers it

• Revisit your rate annually and after pay changes, job changes, or major life events

• Track your year-to-date deferrals if you have worked for more than one employer this year

This material is general information about how 401(k) plans operate. It is not tax, legal, or investment advice and is not a recommendation to contribute at any particular rate. Where this article and your plan document differ, the plan document controls.