It depends on your personal situation, but the more the better. You should take full advantage of tax deferral benefits and contribute the maximum amount every year if you can afford it. However, we understand that life can get in the way of saving and not everyone can afford to put away $19,500 each year (the maximum limit for 401(k) contributions in 2020).
As a rule of thumb, financial planners recommend saving a total of 15% to 20% of gross pay annually, regardless of what type of account it goes towards (401(k), IRA, regular savings, etc.)
We recommend contributing the highest amount you can comfortably afford. For some people, this is 4% from every paycheck, while for others, it may be 10% or more. You can change your contribution rate at any time, so try starting as high as possible and adjusting it later if you really need to.
Is there a minimum amount that I must contribute to my 401(k)?
Nope! Every eligible employee deserves the opportunity to save for retirement, no matter the contribution. Saving less than 1% of your salary is better than nothing at all, and chances are you won’t even notice the difference in your paycheck.
Is there a maximum that I can contribute to my 401(k)?
For 2020, the IRS limits 401(k) contributions to an $19,500 annual maximum. If you are 50 years of age or older, you can make an additional catch-up contributions up to a total of $26,000 annually.