It’s important to save 10 to 15 percent of your income for retirement, but if you can’t contribute at that level yet, it’s okay to start small and aim to increase your contribution gradually each year, advised Kyle McBrien, a certified financial planner with Betterment, a financial services firm.
Mr. McBrien also mentioned that even if you can contribute the maximum amount to your 401(k), it doesn’t necessarily mean you should. Building up an adequate rainy-day fund for surprise expenses or a job loss should take priority before contributing beyond your employer’s match.
Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, highlighted the importance of considering other goals for saving, such as children’s education or contributing to a health savings account.
Here are some questions and answers about saving in a 401(k):
Do extra 401(k) contributions have to be treated as Roth contributions if I’m a high earner?
Under the Secure 2.0 Act, savers earning $145,000 or more making 401(k) catch-up contributions may be made pretax to a traditional 401(k), even for high earners, at least for next year and for 2025.
Can I change the amount of my 401(k) contributions after open enrollment?
While the annual open enrollment period is underway at many workplaces, many employers allow employees to tweak their retirement contributions at any time.
