The optimal monthly 401(k) contribution depends on your financial situation, employer match, retirement goals, and overall financial priorities. Here’s a step-by-step approach to determine your ideal contribution:
1. At minimum, contribute enough to earn your full employer match. This is typically 3-6% of your salary and represents an immediate 50-100% return on your investment—essentially free money that should never be left on the table.
2. For a comfortable retirement, follow these general guidelines:
- Age 25-34: Contribute 10-15% of gross income
- Age 35-44: Contribute 15-20% of gross income
- Age 45-54: Contribute 20-25% of gross income
- Age 55+: Contribute 25-30% of gross income (including catch-up contributions)
3. Consider these factors when personalizing your contribution:
- Current retirement savings gap – Use a retirement calculator to identify how much you need to save to reach your goals
- Tax situation – Higher income earners benefit more from pre-tax 401(k) contributions
- Debt obligations – Balance 401(k) contributions with high-interest debt repayment
- Other retirement accounts – Coordinate 401(k) contributions with IRA or HSA contributions
- Expected retirement age – Earlier retirement requires higher contribution rates
4. Be aware of annual contribution limits. For 2025, the 401(k) contribution limit is $23,500 for those under 50, and $31,000 for those 50 and older (including $7,500 catch-up contributions).
Rather than focusing solely on a specific dollar amount, convert your target percentage to a dollar figure based on your salary. For example, if you make $60,000 annually and aim to contribute 15%, your monthly 401(k) contribution would be $750 ($60,000 × 15% ÷ 12).