Can't Max Out Your 401(k) in 2024? At a Minimum, Save This Much

Having access to a 401(k) plan is by no means a given. Some employers routinely skip out on a 401(k) offering to avoid the cost and hassle. But if you happen to have access to a 401(k) through work, then you have a prime opportunity to build a retirement nest egg. So it pays to put as much money into your account as you can.

Maxing out a 401(k), however, is a pretty tough thing. In 2024, the maximum allowable 401(k) plan contribution is $23,000 for workers under 50. For workers 50 and over, it's $30,500 thanks to a $7,500 catch-up contribution. As such, many people will not be in a position to max out a 401(k) in 2024.

Even if you earn a $100,000 salary, maxing out a 401(k) means parting with almost a quarter of your income. That may not be reasonable.

In fact, Vanguard reports that the average 401(k) saver puts 7.4% of their income away for retirement. So by that standard, you'd need to earn over $300,000 to max out a 401(k) while sticking to 7.4% of your earnings. But if you can't max out your 401(k) in the new year, there's another worthwhile goal to target.

Aim to snag your full employer match

Many companies that sponsor 401(k)s also match worker contributions to some degree. If you can't max out your 401(k) next year, instead, aim to save enough to snag your complete employer match. If your company matches 100% of contributions of up to 3% of your salary as a policy, figure out what that number is and put that amount in from your earnings.

If you earn $50,000 a year, in our example, you're looking at a $1,500 contribution for the entire year to get a free $1,500 from your employer. That's just $125 a month coming out of your paychecks.

Not only is extra money in your 401(k) a good thing, but you get to invest the money your employer puts in. And if you snag a $1,500 employer match in 2024 and don't retire until 2054, that $1,500 will be worth over $26,000 after 30 years if your 401(k) returns an average annual 10%, which is consistent with the stock market's average.

Look outside of your company 401(k) if there's no employer match

It definitely pays to get your hands on every free dollar your employer is willing to contribute to your 401(k) in 2024. But if your company's retirement plan doesn't come with a match, then you may want to consider saving for your future in an IRA instead.

Not only do IRAs commonly charge lower fees than 401(k)s do, but they're available from many different brokerages and they usually offer more investment choices. For example, you can generally buy individual stocks in an IRA. With a 401(k), you're typically limited to different funds, like mutual funds and index funds, that may not give you the control over your investments you want. And while index funds tend to be a low-fee investment choice, mutual funds are notorious for being expensive from a fee standpoint.

Maxing out a 401(k) is a tall order, even if you earn a pretty large wage. So if you can't max out in 2024, don't sweat it. Instead, do the best you can with the goal to put in enough money to get all of the free cash your employer is willing to give you.