How much should I contribute to my 401(k)?
Whether you are just starting your career or have been saving for your retirement for years, you probably have a lot of questions about how much you should be contributing to your 401(k). The amount you should be saving varies from person to person depending on individual circumstances like age, income, debt and other financial responsibilities. However, there are some general rules of thumb that can help you stay on track for reaching your retirement goals:
- Contribute 10% of your gross salary to your retirement savings if possible.
- Take full advantage of any matching opportunities your company offers. For example, if your company matches 50% of the first 6% of your contributions, then make sure you at least contribute that much so you are not leaving “free money” from your employer lying on the table.
- People aged 50 and over can make a catch-up contribution of an additional $6,500. Take advantage of this if you can.
Generally speaking, the earlier and more you can save the better. If you can save up to the contribution limit of $19,500 every year (or $26,000 if you are age 50 or older) then you are likely on track for having a comfortable retirement nest egg. However, this is not always possible for people, so you should contribute what you can, and aim to increase your contributions next year by 1% or 2% more until you can start meeting your contribution limits.
Use a 401(k) calculator
Since there are no cookie-cutter answers to how much you personally should be contributing to your 401(k), you should use a 401(k) calculator to get a better idea. 401(k) calculators are available online, like this one from NerdWallet. They use information like your age, income and current 401(k) savings to help you come up with a target savings number for reaching your retirement goals.
Talk to a ProVise CFP® professional about your 401(k) savings
When saving for your 401(k), you should not be throwing your money in the dark and hoping for the best. You need a strategy to help you get the most out of your savings without causing financial strain on your life today. Our financial professionals at ProVise Management Group can act as your light in the darkness to help you find a savings strategy that works for you.
Our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about planning for your retirement? Contact ProVise today to schedule a complimentary consultation.