Contributing to your 401(k) is an important part of retirement planning

You give, and you get. 

Your contribution rate is the percentage of your earnings that is deducted from your paycheck and moved into your 401(k) plan or other retirement plan account.

In most cases, you choose the value you want to pitch in. And while your take-home pay will be reduced, your retirement nest egg has the potential to grow.

One sound strategy to implement into your retirement savings plan routine is to increase your contribution to 10% (or even more) to your retirement plan account. It can make a big difference to growing your retirement fund.

When should I start contributing?

The earlier, the better.

If you’re eligible to participate in your employer-sponsored retirement plan, don’t wait to start saving. Even if you can’t afford to set your contribution rate to 10% right away, you can still boost your balance thanks to compound growth potential. With compounding, not only could your investments have the potential to grow, but any earnings could also produce earnings because any earnings may be reinvested — tax-free — into your retirement account.

Above all, as you’re climbing the ladder toward 10% as you age, your balance can potentially continue to rise with you.

FOR ILLUSTRATIVE PURPOSES ONLY. This is a hypothetical illustration to show the value of an increase in contributions; it is not intended as a projection or prediction of future investment results, nor is it intended as financial planning or investment advice. It assumes a 6% average annual rate of return, 12 pay periods, $50,000 starting salary with no increases invested over 30 years, a 25% federal income tax bracket, reinvestment of earnings and that the payee lives 20 years in retirement. Rates of return may vary. This illustration does not include any charges, expenses or fees that may be associated with your Program. The tax-deferred accumulations shown above would be reduced if these fees had been deducted.

How can I grow my 401(k)?

Little by little, you can make huge strides.

If you want to stay on track for your future, consider increasing your 401(k) contribution by 1% every year until you reach the 10% target. To remain on schedule (and so you don’t forget!), check with your 401(k) provider to see if it offers an automatic escalation feature — which can help you gradually gain ground each year. 

Should I max out my 401(k)?

You don’t have to stop contributing at 10%.

If you max out your 401(k), also known as deferring up to the IRS limit, you can help potentially strengthen your nest egg at an even faster pace. The IRS sets contribution limits on an annual basis when it comes to how much you can save for retirement. In 2025, you can contribute up to $23,500 to your 401(k) plan, up from $23,000 in 2024.¹ If you’re age 50 or older in 2024 or 2025, you may be eligible to sock away an additional $7,500 in catch-up contributions. Starting from 2025, those aged 60 to 63 can contribute an additional $3,750 to their 401(k) plans - on top of the regular maximum contribution of $23,500 and the regular $7,500 catch-up for those 50 and older.

What about 401(k) matching?

If your company offers matching, it’s often referred to as “free money.” That’s because when you contribute to your 401(k) plan, many employers will usually match 50% or 100% of your contributions up to a certain amount. For example, if your organization offered a 100% company match up to 5% and you set your contribution rate to 5% (or higher), you would essentially double your total investment when fully vested. 

Employer contributions are a great way to boost your overall retirement savings, so a good rule of thumb is to aim to contribute enough to your 401(k) to get the full employer match.