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


Quick Answer

Workers should contribute at least enough money to their 401(k)s to receive maximum matching benefits from their companies. If they can afford it, employees should contribute the maximum allowable portion.

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Full Answer

Employees should start 401(k) contributions as soon as possible. One guideline is for 35-year-olds to have 401(k) balances equal to their current salaries. For 45-year-olds, the amount should be three times their salaries. It grows to five times as much for 55-year-olds and eight times as much for 67-year-olds. Basically, a 35-year-old who makes $50,000 a year should have a $50,000 401(k) balance.

Annual contribution limits restrict how much a worker can invest in his 401(k). These amounts change depending on inflation.

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