What Percentage of My Pay Should I Put in My 401K?


Start planning and saving for your retirement early to ensure you enjoy the lifestyle you are accustomed to in your golden years. No single percentage contribution to your 401K is right for everyone. However, there are some guidelines to consider as you decide what contribution is right for you.

Employer Matching

Employers often offer matching 401k contributions, up to a maximum percentage of your pay. Check if this is the case for your employer. If it is, you'll want to contribute at least the maximum amount that will be matched. Doing otherwise is leaving free money on the table.


Other debts may limit the amount you should be saving right now. If you have high-interest credit card debt, you should aggressively pay that back before focusing on your retirement savings. Saving yourself the drain of large interest charges will be worth the delay provided your remain debt-free in the future. After those debts are paid, use the money you were using for debt service for retirement savings.


What age you start saving for retirement will have a large impact in what percentage of your pay you need to save. If you start saving in your early twenties, you can get away with saving 6 to 10 percent of your pay. However, if you wait until your late thirties, you'll need to double that to catch up. If you wait until your fifties, you may never catch up to the savings you could have had, though you can still save for an acceptable retirement. Bear in mind that you'll need up to 70 percent of your pre-retirement salary each year to maintain your current standard of living.

Other Investments

A 401K plan isn't your only option for saving for retirement. Adding a Roth IRA, instead of increasing the percentage you save to your 401K, can be a good option. This is because contributions to your Roth IRA are taxed now instead of when you withdraw them. This can save you money if taxes increase in the future and gives you the advantage of a tax-free income source in your retirement. You can also choose other investments, such as mutual funds, that you can withdraw penalty-free in case of emergency expenses.

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