Just a 1% increase in your 401(k) contribution can make a big difference. Learn how making the most of your retirement plan now could help ensure your golden years are even more golden.
When you contribute to a 401(k), 403(b), or IRA, you may be on a path to help secure your financial future. But could you save more? Making the most of your organization's retirement plan and your own savings goals today may mean it's easier to reach the financial goals you have for your post-work years. Here are some insights to help.
鈥淗ow much should I save for retirement?鈥
The answer is, there's a different answer for every person. It depends on a combination of what you want to do and what you're able to do, on how you're able to balance retirement savings with other financial goals. The best answer is, save as much as you can for as long as you can.
鈥淗owever, a good rule of thumb is to try to save 10鈥15% of your income toward retirement,鈥 says Stanley Poorman, a financial professional with Principal庐, 鈥渂ut that also depends on when you get started. That answer may work if you start in your 20s. If you're starting in your 50s, though, you may need to save more to retire comfortably. There鈥檚 no one-size-fits-all answer.鈥
Another factor is whether you have a matching contribution from your employer, and if so, what percentage the company contributes. Poorman suggests deferring enough of your pay to get that match. (It鈥檚 often referred to as free money.)
How often can you change your 401(k) contribution?
How often you can adjust your 401(k) or 403(b) contribution is generally determined by your employer and your retirement plan鈥攊t may be once a year or as often as you鈥檇 like. (Check with your HR department or your retirement plan provider if you're not sure.)
It may not seem like small increases make a difference but they do. Think about a raise you might get鈥攕ay it's several percentage points. If you take 1% of that raise and save it in your 401(k) or IRA, it may make a big difference down the road. Consider the example below for someone with a $35,000 annual income:1
| Additional contribution | Reduction in bi-weekly take-home pay | Estimated additional monthly retirement income | Total employee contributions over 30 years |
|---|---|---|---|
| 5% | $50 | $933 | $90,340 |
| 3% | $30 | $560 | $54,204 |
| 2% | $20 | $373 | $36,136 |
| 1% | $10 | $187 | $18,068 |
What are 2025 retirement contribution limits and income ranges?
Typically the IRS increases the amount you can save each year in your retirement accounts, and 2025 is no different. In 2025, you may save up to $23,500 in your 401(k) plans, a boost of $500. The IRA and Roth IRA contribution limits remained the same from 2024: $7,000.2
Find the 2024 retirement contribution limits and income restrictions that affect you.
How to use catch-up contributions for your 401(k) and IRA after age 50
Once you reach age 50, you're able to save even more through what are known as catch-up contributions. At that age, you may contribute an additional $7,500 a year to a 401(k). If you're age 60-63, the total is $11,250, also for 401(k)s. For IRAs and Roth IRAs, the catch-up contribution for people age 50 and older is $1,000.
What's next?
If you have a Principal retirement account from your employer, to increase your contribution and learn about rollover options. Don鈥檛 have an employer-sponsored retirement account? We can help you set up your own retirement savings with an IRA or Roth IRA account. Questions about your IRA鈥攈ow to add money or make changes? Visit our Help with IRAs page.
