How much should I contribute to my 401k?

At minimum, contribute enough to get your full employer match—it's free money. Ideally, contribute 10-15% of your salary. The 2024 contribution limit is $23,000 ($30,500 if 50+). Start with the match, then increase by 1% annually. Every 1% increase on a $60,000 salary equals an additional $153,000 over 30 years at 7% returns.

What is an employer 401k match and why is it important?

Employer matches are contributions your company makes to your 401k, typically 50-100% of your contributions up to 3-6% of salary. This is an immediate 50-100% return on your money. Not capturing the full match is like declining part of your salary. Always contribute at least enough to get the full match.

Should I choose traditional or Roth 401k?

Traditional 401k contributions are pre-tax (lowers current taxable income), taxed upon withdrawal. Roth 401k uses after-tax dollars, grows tax-free, and withdrawals are tax-free. Choose Roth if you expect higher tax rates in retirement (early career, low income). Choose traditional if currently in high tax bracket. Many split between both.

How much will I have in my 401k when I retire?

This depends on contributions, employer match, investment returns, and time. Example: Contributing $500/month with $250 employer match at 7% annual return for 30 years yields approximately $1,128,000. Starting 10 years earlier or contributing $100 more monthly dramatically increases final balance due to compounding.

When can I withdraw from my 401k without penalty?

Normal retirement age is 59½. Earlier withdrawals incur 10% penalty plus income taxes. Exceptions include first home purchase ($10,000 limit), qualified hardships, disability, or substantially equal periodic payments (SEPP). After 59½, traditional 401k withdrawals are taxed as ordinary income; Roth withdrawals are tax-free.