The Question Most People Are Afraid to Ask
You’ve got a 401(k) set up at work — maybe you enrolled when you first got hired and picked whatever the default contribution was. Or maybe you’ve been meaning to increase it but aren’t sure if you’re already behind or getting it right.
Here’s the honest answer: there’s no single “correct” number that works for everyone. But there is a clear framework you can use to find your number — and a few guideposts that financial educators consistently recommend.
Let’s break it down in plain terms.
Step 1: The Non-Negotiable Starting Point — Your Employer Match
If your employer offers a 401(k) match, your first goal is simple: contribute at least enough to capture the full match.
Here’s why this matters more than anything else: employer matching is free money. If your employer matches 50 cents for every dollar you contribute, up to 6% of your salary, and you’re only contributing 3% — you’re leaving money on the table every single paycheck.
Example: Let’s say you earn $50,000 a year, and your employer matches 100% of contributions up to 4% of your salary. That’s $2,000 in free employer contributions if you contribute $2,000 yourself. But if you only contribute $1,000, you only get $1,000 in matching funds. That $1,000 gap is money you worked for that you didn’t collect.
Before you worry about percentages, guidelines, or maximum limits — make sure you’re capturing the full match. That’s your floor.
Step 2: The Target Most Experts Recommend
Once you’re capturing the full employer match, the widely accepted target for retirement savings is 10–15% of your gross income per year — including both your contribution and your employer’s match.
So if your employer matches enough to bring your total to 10%, and you’re contributing 7%, you’re right on track. The combined percentage is what matters.
Is 15% better than 10%? Yes — if you can swing it. More savings means more cushion, more compounding time, and more flexibility when you reach retirement. But for many people, 10–15% is a realistic and achievable target that will put them in a solid position over a full working career.
What if you’re starting later? If you’re in your 40s or 50s and just getting started or getting serious, a higher contribution rate — 20% or more — can help close the gap. The good news is that the IRS also allows catch-up contributions for people over 50 (more on that below).
Step 3: Know the 2026 IRS Contribution Limits
The IRS sets a cap on how much you can put into your 401(k) each year. For 2026:
- Under age 50: You can contribute up to $24,500 to your 401(k).
- Age 50 and older: You can contribute an additional $8,000 in “catch-up” contributions, for a total of $32,500.
- Ages 60–63 (SECURE 2.0 enhanced catch-up): Thanks to newer legislation, people in this specific age range can contribute an additional $11,250 in enhanced catch-up contributions, for a total of $35,750.
These limits apply to your contributions only — your employer’s match doesn’t count against your cap. Most people won’t hit these limits, and that’s perfectly fine. Focus on your target percentage instead.
Step 4: Start Where You Are, Then Increase Over Time
Here’s the most common mistake people make with 401(k) contributions: waiting until they can “afford” to contribute more.
The truth is, you’ll almost never feel like you have extra money to redirect. Lifestyle expenses tend to expand to fill whatever income is available. The trick is to build contributions into your budget before you get used to spending that money.
Two strategies that work:
- The 1% increase. If you’re contributing 3% right now, bump it to 4%. That small change is barely noticeable in your paycheck — but it adds up significantly over decades. Set a reminder to increase by 1% every six months or every year.
- The raise strategy. Every time you get a raise, direct half of it into your 401(k). If you get a 3% raise, increase your contribution by 1.5%. You’ve never spent that money before, so you won’t miss it — and it goes straight to work building your future.
What If You Really Can’t Afford Much Right Now?
Even 1% is worth doing. At $50,000 a year, that’s about $500 — or roughly $19 per paycheck. It won’t retire you, but it keeps the habit alive, keeps the account growing, and keeps you in a position to increase contributions when your situation changes.
Starting small is not failure. Doing nothing is.
A Quick Reference Guide
| Situation | Recommended Approach |
|---|---|
| Employer offers a match | Contribute enough to capture the full match — first |
| Just starting out | Start at 3–5% and increase 1% annually |
| On track and stable | Target 10–15% total (your contribution + employer match) |
| Starting later (40s/50s) | Aim for 20%+ if possible; use catch-up contributions |
| Tight budget | Contribute 1%; increase at every raise |
Your Next Move
Log into your 401(k) portal this week and check two things: what percentage you’re currently contributing, and whether you’re capturing your full employer match. That’s it. Two numbers. From there, you’ll know exactly what to do next.
Capture the match. Target 10–15%. Increase a little each year. That’s the whole playbook.
This article is part of FFoA’s Financial Literacy Article Series — accessible, judgment-free financial education for every stage of life. Explore more at financialfoundationsofamerica.org.