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Personal Finance

How Much Should I Have in My 401(k)?

If you’re enrolled in a 401(k) plan, here is what you need to know about this retirement savings vehicle.


If you ask any Morningstar specialist for advice, they’ll tell you to save early and save often. No matter the stage of life and investing you’re in, one thing is for certain: You need to save for retirement.

One popular way to do this is by enrolling in your company’s 401(k) retirement plan. With this retirement savings vehicle, your contributions aren’t taxed and many companies offer an employee match.

How Much Should I Contribute to My 401(k)?

Some folks have ambitious retirement goals, from those dedicated to the Financial Independence, Retire Early, or FIRE, movement to those who are aiming to save $1 million in their 401(k). What if you don’t fall into, or anywhere near, those categories?

No matter your ambitions, there are still limits to guide your contribution plans.

Starting in 2023, here are the new 401(k) contribution limits. (Note: Part of your contribution may also come from your employer if they offer a company match.)

  • Under age 50: $22,500
  • 50 and over: $30,000

Keep in mind, these are limits—not numbers you have to meet every year. One of the most widely used guidelines for setting and tracking your savings goals is Fidelity’s Age-Based Savings Benchmarks.

Let’s break it down:

  • Age: 30, Savings: 1 time your salary
  • Age: 45, Savings: 4 times your salary
  • Age: 50, Savings: 6 times your salary

Remember, this is just a guideline, and the specifics will vary depending on the individual.

How Much Do I Need in My 401(k) to Retire?

If you’re following Fidelity’s benchmark as a guideline, your target is 10 times your salary at 67. However, many variables can come into play when it comes to calculating your retirement savings “number.” Morningstar’s director of personal finance, Christine Benz, also recommends taking these factors into account:

  • What is your “income-replacement rate”? Find out how much of your working income you’ll most likely need to replace in retirement. Benz recommends a benchmark of 75% to 80%.
  • How much do you expect your retirement spending to change versus what you’re spending now? This checklist is a good place to start.
  • What other nonportfolio sources can you rely on? This may include a pension or Social Security.

Should I Contribute to My 401(k) or Pay Off Debt?

Juggling financial goals is something you’ll be doing throughout your entire life, writes Morningstar’s Josh Charlson. He recommends, even it’s small, to make contributions to your 401(k) so you can get a head start.

To help you balance these financial goals, have a plan for paying down your debt. After you figure out how much you owe, how much time you have, and what the interest rates are, consider trying out one of these methods:

  • Debt avalanche: Rank your debts based on the interest rate from highest to lowest, make minimum payments on all the debts, and throw extra cash at the highest interest-rate debt. Once you pay off the highest interest-rate debt, move onto the next highest one.
  • Debt snowball: List your debts from smallest to biggest, make minimum payments on all the debts, and throw the extra cash on the smallest balance. Once you pay that one off, move onto the next debt, and keep building up the snowball until everything is paid off.

Develop a plan that works best for you and your situation with these steps.

What Is a 401(k) Catch-Up Contribution?

If you’re 50 or older, you’re eligible for a catch-up contribution. Catch-up contributions are a way for you to save more for retirement later in your life, which can be helpful if you already had a late start. The limit for 2023 catch-up contributions is $7,500 for a 401(k) and $1,000 for an IRA. Find out if you’re eligible for catch-up contributions here.

If you’re feeling behind, portfolio strategist Amy C. Arnott has some ways you can play catch-up with your retirement savings based on your life stage:

  • In your 30s: Try saving 15% of your income.
  • In your 40s: Try saving 18% of your income or maxing out your contributions every year.
  • In your 50s: Increase salary percentage, max out contributions, consider catch-up contributions, or contribute to taxable accounts.
  • In your 60s: Delay retirement or work part-time, readjust your spending, or consider a fixed annuity.

Still wondering how much you should have in your 401(k)?

We outline how to make the most out of this retirement savings vehicle in our special report “Your 401(k) Plan Guide.”

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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