Maximizing Your 401(k): A Smart Move for Your Future

In 2024, only a small group of people, about 14%, who have retirement plans like 401(k)s or 403(b)s, are putting in the highest amount allowed.

Key Contribution Limits

• Standard Limit: $23,500 per year
• Age 50+: $31,000 per year (due to recent law changes)

Why It Matters

Saving more now can make a big difference later. Even if you can't save the maximum, aiming for it can help secure your future, especially if you don't have many years left to save.

Income and Savings

• Higher Earners: Nearly half of those earning over $150,000 a year save the maximum.
• Moderate Earners: Only 2% of those earning between $75,000 and $99,999 save the maximum.

The Power of Compound Interest

• Example 1: Start saving the maximum at 25 and stop at 30. If your account grows to $100,000 by then, and you don't add any more money but let it grow at a 10% average return, you'd have over $2.8 million by 65.
• Example 2: Start saving at 30 and only reach $100,000 by 40, even if you save $1,000 every month until 65, you'd have over half a million dollars less.

Future Uncertainties

• You might switch jobs to a place without a retirement plan.
• Retirement accounts like 401(k)s have higher contribution limits than other accounts, like IRAs, which only allow $7,000 a year in 2025.

Smart Moves

• Aiming for the maximum can help you catch up if you've been putting off saving for retirement.
• Saving as much as you can is a smart move, especially with the uncertainty of Social Security.

Achieving the Goal

Saving tens of thousands a year isn't easy, but there are ways to get closer to this goal, even on a modest income.