Your Age

One important factor that will affect the amount you should be packing into your 401(k) is your age. When you’re in your twenties and beavering away at your first job, retirement will look a long way away. Your pay will also be low and you’ll have little spare cash to put aside for the next forty years.

You should still make the effort.

When you’re in your twenties, you should be trying to put at least 7 percent of your income into your 401(k). So if you’re earning $30,000 a year, that would mean saving just $175 of your income every month—and remember that those savings will lower your taxes. You can either get into the habit of putting money aside for the future, or you can give more money to the government.

As you move into your thirties and forties, you can increase that portion of your income to 8 percent. That might still feel challenging. You’re in the middle of your career, retirement still feels a long way away, and you now have a mortgage to pay, and children to pay for. If you’ve paid off your student loans, you’ll now have to start saving for your children’s future college fees.

But again, it’s still vital to continue filling your 401(k). For someone earning between $60,000 and $100,000 a year, that will mean saving between $400 and $667 a month. It might feel like a sizeable chunk of income but it’s vital to keep putting those funds away to ensure a comfortable retirement.

Your 401(k) in Your Fifties

As you move into your fifties, you’ll want to start increasing your payments. The tax authorities increase the limits, giving you even more incentives to fill your 401(k), and you should be earning more at this stage too. This is your big chance to make catch-up payments and make up for not saving enough when you were younger.

If you’re lucky, you’ll have little to save for but retirement at this age. The mortgage might be paid, the kids could be out of the house, and you should be looking forward to enjoying a retirement. It’s still more than a decade away, so you do have time to prepare for it. That’s time you need to use now.

Your 401(k) in Your Sixties

Your sixties are your last chance to fill your 401(k). You won’t make much compound interest before you decide to stop working but you will be able to increase your payouts if you save money now. You should be aiming for about 11 percent in these years.

Some people, of course, continue working past their pension age, and not always because they don’t have enough money to retire. Some people just enjoy working. They might put in fewer hours or work part-time but that work gives them something to do. The income supplements their pensions, and it also lets them continue to save for the day they stop entirely. People who work in their seventies tend to continue to invest 12 percent of their income to their 401(k). Even if they won’t get to enjoy the payouts from those 401(k)s for long, the funds are inheritable. Continuing to put money into their 401(k)s allows them to reduce their tax liability while increasing the value of their estate.