Contributing $12,000 to Your 401(k) in 2024? Here's What Your Balance Might Look Like in 30 Years

If you want the option to contribute $1,000 a month to a retirement plan, then you may need to look outside of an IRA. That's because IRAs max out this year at $7,000 for savers under the age of 50 and $8,000 for savers 50 and older.

But 401(k) plans have much higher contribution limits than IRAs. In 2024, 401(k)s max out at $23,000 for savers under 50 and $30,500 for those 50 and over. And while it's really hard to come up with that much money for retirement savings in a single year, contributing $1,000 a month, or $12,000 a year, may be doable if you earn a nice wage and budget your money carefully.

Of course, to put $12,000 into a 401(k) this year, you're going to have to give something up, whether it's a vacation, a nicer car, or new furniture. But when you see what a $12,000 contribution in 2024 might do for your future, you may be inspired to part with that money if doing so is feasible.

Your 2024 contribution could go a long way

When you're investing for a long-term goal, putting your savings into stocks via a brokerage account or employer-sponsored retirement plan is a good bet, despite the risks involved. Over the past 50 years, the stock market has delivered an average annual 10% return, which accounts for both strong performance years and downturns.

Now, let's say you put $12,000 in your 401(k) this year, and over the next 30 years, your plan gives you a 10% return on your investments. That would leave you with a balance of over $209,000. And that's just from a single year's contribution. Talk about impressive.

How to invest your 401(k) in stocks

With an IRA, you can buy stocks on a company-by-company basis. But 401(k)s generally don't allow you to do that. Instead, they limit you to different funds. But many of those funds naturally lead to a stock-heavy portfolio.

It's common to find mutual funds in a 401(k), and those commonly invest in assets like stocks (though you'll need to read each fund's description to see which assets it tends to focus on). You can also usually find index funds offered through a 401(k). These can be a more cost-effective investment from a fee perspective, since index funds are passively managed and mutual funds are actively managed. Because of this, your fees to invest in mutual funds may be higher.

Of course, if you can't come up with $12,000 this year to contribute to a 401(k), that's understandable. In that case, do your best. But also, do try to contribute enough money to snag your employer match in full, if you're eligible for one.

Let's say you don't even get a match in your 401(k) and are able to put in $3,000 this year. At a 10% return, you're still looking at growing that contribution into over $52,000 in the course of 30 years. So rest assured that whatever sum you manage to put into your 401(k) has the potential to go a long way.