One of the most common retirement savings plans is a 401(k), which is a tax-advantaged, employer-sponsored program. Some employers will even match a portion of your contributions.

For these reasons, a 401(k) can be extremely valuable in meeting your long-term retirement goals. However, according to recent Empower research, only 11% of workplace savers believe they're saving enough for retirement, citing a few top limiting factors:

• Need to make ends meet (35%)
• Inflation (35%)
• Paying back debt (29%)

If you are contributing to a 401(k), are you saving enough? Let’s find out.

Calculate your 401(k) savings

For a quick estimate, try out this 401(k) calculator.

401(k) calculator

Estimate what your 401(k) will be worth when you retire.

Current age How old are you now?

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Desired retirement age What age to you expect to retire at?

Enter a valid age greater than your current age

Current 401(k) balance How much do you currently have invested in your 401(k) account(s)?

Enter a valid amount rounded to the nearest dollar

Average annual contribution (with employer match) How much do you think will go into your 401(k) on an annual basis?

Enter a valid amount rounded to the nearest dollar

Get results

At age 55, my 401(k) will be worth: $300,000

Disclaimer

This calculator is for information purposes only and is not intended to provide investment, legal, tax or accounting advice, nor is it intended to indicate the performance, availability or applicability of any product or service. The accuracy of this and its applicability to your circumstances is not guaranteed. You may wish to consult an appropriate and qualified advisor about your unique situation. You should always consult with your financial planner, attorney and/or tax advisor as needed. Results and analyses are based exclusively on information provided by you and no assumptions are made as to your particular situation. Projection is hypothetical in nature and not predications or guarantees. All investments carry a degree of risk and past performance is not a guarantee of future results. Asset allocation and diversification do not ensure a profit and do not protect against loss in declining markets. Rate of return is assumed at 8%.

Key investment terms and definitions

To help you better understand your 401(k), following is a handful of common 401(k) investing terms and definitions.

Current 401(k) balance: The amount you currently have invested or saved in your 401(k).

Annual salary: Your yearly income before taxes and other benefit deductions.

Percent to contribute: The percentage of your annual salary that you put toward your 401(k) each year.

Annual contribution limits: Your total contribution for one year is based on your annual salary times the percent you contribute. Note that your annual contribution is also subject to certain contribution limits set by the IRS. The annual maximum is $23,000 in 2024. Starting at age 50, a “catch-up” contribution allows you to put aside an additional $7,500 every year. Employer contributions do not go toward an employee’s maximum annual contribution limit.

Benefits of a 401(k)

Contributing to a 401(k) as soon as possible can be a small act with significant impact. Consider this analysis of the average 401(k) balances by age, which shows the long-term payoff of compounding and disciplined 401(k) contributions.

Your 401(k) savings can support your retirement plan with several key benefits along the way.

Tax advantages

Traditional 401(k) plans are tax-deferred. This means that you don’t have to pay income taxes on your contributions. When you retire, all withdrawals you make are treated as regular income: you pay income tax according to your income tax bracket for that year.

Employer match

For most employees, a defined contribution plan like a 401(k) is one of the primary benefits offered by their employer. Employer matching of your 401(k) contributions means that your employer contributes a certain amount to your retirement savings plan based on the amount of your 401(k) contribution. Your employer may match your 401(k) contributions on a percentage basis. This is a potential no-risk return on your 401(k) contribution.

Specific terms of 401(k) matching can vary widely. Your employer may use a very generous matching formula, or choose not to match your contributions at all. Additionally, not all employer contributions to an employee’s 401(k) plan are the result of matching. Employers may make contributions to employee plans regardless of employee contributions.

Check out this infographic and example of 401(k) matching and potential growth over time.

Make sure you check your employer’s plan documents for the details on exactly how your 401(k) works.

Leaving your job is another time to consider your 401(k). During this big life transition, you may want to consider a 401(k) rollover.

How much of your salary should go into your 401(k)?

A common answer is “as much as you can contribute.” Instead of aiming for a numerical amount, instead consider a percentage of your salary. This way, your contributions will increase in line with your salary. Contributing 10% (or even more) to your retirement plan account is often a good goal to shoot for. It can make a big difference, too; Empower research reveals people who save at least 10% are on track to replace 100% of their working income down the road.

If your employer offers 401(k) matching, consider at least contributing enough to get the full employer match. Otherwise, you’re leaving part of your overall compensation on the table.

Making the most of your 401(k)

If you’re falling short with your current savings, it’s not too late to get on track. Regardless of how you compare to your peers now, you can make progress by staying on top of your retirement plan.

Here are a few avenues for making improvements:

1. Maximize your savings rate by contributing as much as you can afford (and as much as is allowed by law). There is a compounding effect to investing. As your assets appreciate over time, all future gains are based on that larger base. The longer you can take advantage of that compounding effect, the better.
2. Contribute at least as much as is required to receive your employer match. If you don’t, it’s like leaving free money on the table. That match is part of your compensation as an employee – don’t refuse it.
3. Avoid taking early withdrawals. Try to think of your retirement savings accounts like a pension. People working towards a pension tend to forget about it until they retire. While that money is locked up until later in life, it becomes a hugely powerful resource in retirement.
4. Be honest with yourself about how much time you want to devote to learning about your 401(k) and organizing your financial goals. If you know you won’t spend enough time on your own 401(k) management, get to know a financial professional who can help you with your 401(k). You want to make sure you’re on track to meet your goals, and one of the best ways to do that is to have someone with experience show you the way.