How much should I contribute to my 401(k)?

There is no single right percentage — but there are clear benchmarks to work from. The IRS governs 401(k) plans under Section 401(k) and sets the maximum amounts you can contribute each year. How much you *should* contribute depends on your income, expenses, employer match, and how far you are from retirement. This page explains the reference points most people use.

Step 1: Always capture the full employer match

If your employer matches contributions — say, 50% of what you put in up to 6% of salary — not contributing enough to capture that full match is leaving part of your compensation on the table. A common match formula: on a $70,000 salary, contributing 6% ($4,200/year) earns $2,100 in employer contributions — a 50% immediate return before any investment gains. According to the DOL's EBSA, employers must disclose match formulas and vesting schedules in your plan's Summary Plan Description.

Step 2: Target 15% of gross income (including the match)

A widely cited benchmark from retirement research is saving 15% of gross income per year toward retirement — including whatever your employer contributes. If your employer matches 3% of salary, you'd contribute 12% from your paycheck to hit 15% combined. This rule of thumb is designed to replace roughly 70–85% of pre-retirement income starting at age 67, assuming investment growth. It's a starting framework, not a guarantee — your specific situation may require more or less.

IRS contribution limits for 2025

• Employee elective deferral limit: $23,500 per year.
• Age 50+ catch-up: additional $7,500, for a total of $31,000.
• Ages 60–63 super catch-up (SECURE 2.0, effective 2025): additional $11,250 above the standard limit instead of $7,500.
• Combined employer + employee limit: $70,000 ($77,500 with standard catch-up).
• Employer matching contributions do not count against your $23,500 personal limit.

If you can't afford 15% yet — start small and automate increases

Contributing even 1–3% and increasing by 1 percentage point each year — or with every raise — can produce significant balances over a long time horizon because of compound growth. Many 401(k) plans offer an auto-escalation feature that raises your contribution percentage automatically each year. Using it removes the decision from your hands. The IRS notes that automatic enrollment and escalation features in 401(k) plans are permitted and increasingly common.