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How to Max Out Your 401(k)


Approximately 86% of 401(k) participants don’t save the maximum allowed amount in their tax-advantaged employer-sponsored retirement plans, according to a 2022 study of retirement saving by Vanguard. If you’d like to max out 401(k) savings, techniques include automating contributions, increasing contributions over time, using catch-up contributions when available, taking full advantage of any employer matches, and trying to stay current on changes to 401(k) contribution limits, as well as any changes to the amount your employer matches. A financial advisor can provide you with the latest insight and information on ways to contribute the maximum amount to your 401(k).

Why Max Out Your 401(k)?

A 401(k) plan is a tax-advantaged, employer-sponsored retirement plan. It’s the most popular way to financially prepare for retirement in America. Because you can deduct contributions to a 401(k) from your current taxable income, participating in one of these savings plans can help reduce the amount you owe next time you file your income tax return. Earnings on investments you make using your 401(k) funds also grow tax-free, giving these widely used retirement savings tools a double-whammy of financial appeal.

Tax laws limit the amount you can save using a 401(k). However, these limits are still above what most 401(k) participants put away for retirement. In 2022, Vanguard’s recurring study of retirement saving practices found that only 14% of 401(k) participants saved the maximum amount. However, there are many benefits to saving more.

For example, say you are 35 years old, earn $60,000 annually, and save $5,000 per year in a 401(k) with an employer match of 100% of your contributions up to 6% of your salary. In that case, by age 66, assuming you average a 7% annual return on your investments, you’ll have approximately $1,083,174. If, however, you increase your annual savings to the 2023 maximum amount of $22,500, you’ll have $3,287,307 put away by retirement age.

How to Max Out 401(k) Contributions

A 401(k) defined contribution plan is Americans’ most popular tool when it comes to saving for retirement. And, as the number of employers offering defined benefit plans continues a decades-long decline, 401(k) plans are becoming more important all the time. With that in mind, here are five common options to consider if you’re wondering how to max out 401(k) contributions.

  1. Stay up to date on 401(k) contribution limit changes. The IRS changes the maximum allowed contributions each year. For 2024, for example, the limit increased by $500 to $23,000.  
  2. Take full advantage of any employer match. When your employer matches your contribution, it’s like free money. Even if you’re not contributing the legal allowed maximum, consider contributing at least enough to get the full matching amount.
  3. Automate your contributions. If your contributions are set up to occur automatically without any action on your part, you’ll put away more. Numerous studies have shown that automating contributions increases contributions. And, when the money isn’t in your take-home pay, you may not miss it as much as if you had to consciously decide to put money into retirement savings.
  4. Increase contributions over time. As your earnings increase over the course of your career, raise the amount you’re socking away for life after you stop working.
  5. Use catch-up contributions. Federal regulations allow you to make extra catchup contributions to your 401(k) after you reach age 50. For 2023 and 2024, the permitted catch-up amount is $7,500. These extra contributions are intended to help people who haven’t saved enough earlier in their careers. However, anyone who has reached the requisite age and whose employer offers a 401(k) plan can take advantage of them to increase the amount they’re putting away for retirement.

Bottom Line

A man researches how to max out a 401k.

When it comes to how to max out a 401(k), there are lots of ways to ensure that you’re taking maximum advantage, although relatively few people do. You can avoid missing out on the benefits of this tax-advantaged way to save for retirement by automating contributions, using catch-up contributions when available, using any and all employer matches, boosting contributions as your salary rises, and paying attention to any changes in contribution limits.

Tips for Maxing Out a 401(k)

  • Taking full advantage of your 401(k) is one of the most powerful ways to save for retirement. A financial advisor can help you make sure you’re doing just that. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals get started now.
  • SmartAsset’s 401(k) Calculator is your go-to tool for helping plan how to max out 401(k) contributions as well as determining how your 401(k) contributions and investment returns will accumulate over time. You can change contribution amounts, employer matches, investment returns, and other key factors to give you a picture of where you’ll be financially when you decide to stop working.

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