How much should you contribute to your 401(k)?

For more than 40 years, a 401(k) account has been the go-to tool to help people save for retirement. It’s an employer-sponsored retirement plan that is funded by a portion of your paycheck. The amount is automatically moved into a tax-advantaged account where your money can grow.

In many cases, employers match a percentage of the funds you contribute, padding the balance even more.

While the 401(k) account has been around for almost five decades, there’s still a fair amount of confusion around how to properly use them, especially when deciding how much to contribute. The amount depends on your income, goals and stage of life, but there are a few guiding principles that can help you get the most out of your plan, no matter where you’re starting.

These tips from our wealth advisors can help you use a 401(k) to your advantage.

Begin with the employer match, if one is available

If your employer offers a match, contribute the amount needed to receive the full benefit, if you’re able. For example, if your company matches up the first 3% of your salary, then put in at least 3%. Over time, the matched amount will create a very cushy nest egg.

Quick tip: Think of the employer match as part of your salary. Skipping it is like turning down free income.

Gradually increase to 15% of your gross income

Once you’re a little more financially settled in life, increase your contribution to 15% of your gross income. Even if your employer only matches a certain amount, the money you’re saving will compound and benefit you later.

Try this progression:

1. Start with 6-8%, if possible
2. Increase by 1% each year
3. Use salary increases to boost your savings without impacting take-home pay.

Quick tip: Set your contributions to increase annually or each time your salary goes up.

Know your contribution limits

While it’s great to put away as much as possible, there are contribution limits. Going over those pre-determined amounts can result in tax penalties if you forget to move the funds to another account.

For 2025, the contribution limits are:

• $23,000 if you’re under age 50
• $30,500 if you’re 50 or older (including a $7,500 catch-up)

Knowing these limits can save you a headache later.

Quick tip: Set a long-term goal to max out your 401(k), even if it takes time. Small increases, especially after raises or bonuses, add up.

Adjust as your life changes

Your ideal contribution must evolve with your career, family needs and retirement timeline.

• In your 20s and 30s, take advantage of long-term compounding growth.
• In your 40s and 50s, ramp up contributions and reassess your retirement timeline.
• If you’re over 50, explore catch-up contributions and income modeling to stay on track.

Quick tip: Schedule a financial checkup with your local Park wealth advisor at least once per year.

Remember the rest of your financial picture

Yes, it’s important to contribute to your 401(k). However, you don’t want to accidentally harm yourself financially in the process.

If you’re juggling high-interest debt, building an emergency fund, paying student loans or saving for a home, your contribution rate may need to flex temporarily.

Don’t stop making contributions altogether, though. Small, steady investments keep your retirement goals moving forward while you take care of other priorities.

Quick tip: Aim for balance, not perfection. Consistency over time is what builds lasting wealth.

Let’s connect

No matter where you are in your retirement preparation, our wealth management team can help. We have experience you can trust and will create a plan that’s unique to you. To start the conversation, fill out this form and one of our local wealth advisors will contact you.

This information is prepared for informational and educational purposes. Always consult a qualified tax advisor for personalized guidance. Investments and other non-deposit products are not deposits, not FDIC insured, not guaranteed by the bank, and may lose value.