How much should I contribute to my 401(k)?
(NewsNation) — Like most financial matters, the ideal 401(k) contribution amount varies from person-to-person depending on their saving goals.
A 401(k) is one of the most common employer-sponsored retirement accounts. Offered to full-time employees, it allows workers to allocate a percentage of their paycheck to a retirement account.
Some employers will match employee contributions past a certain percentage threshold — a good starting goal for those uncertain of how much to contribute.
How much should I contribute to my 401(k)?
While there's no perfect contribution amount, the general rule of thumb is to contribute 15% of your pre-tax income.
That's because most people need anywhere from 55% to 80% of their pre-retirement income for post-retirement living, according to data from Fidelity.
Contributing 15% will also put you above the employer match threshold at most jobs, allowing you to not only save your income but also collect some extra cash from your workplace.
If you know you'll have other post-retirement sources of income — like a pension — you can likely get away with saving less of your income, though it depends on your financial position and decision-making.
What is the 401(k) contribution limit?
While it is great to contribute as much as possible to your retirement account, there are some finite limits to keep in mind.
The maximum 401(k) contribution for 2025 is $23,500. Age can affect that number, with people 50+ able to contribute another $7,500 as a "catch-up contribution," according to NerdWallet.
The catch-up contribution limit increases further for those 60 to 63 years old, ringing in at $11,250.
401(k) plan types
401(k) plans typically come in two types: Traditional and Roth. With a Traditional 401(k), taxes will be taken from your amount when you make a withdrawal. With a Roth 401(k), your money is taxed before it is put into your account.
“Unlike with withdrawals from a regular 401(k), with a Roth, you owe the IRS nothing when you start taking qualified distributions as long as you are 59 1/2 and have held the account for five years or more,” according to NerdWallet, a financial service website.
NewsNation's Ashley N. Soriano contributed to this report.