3 Tips to Max Out 401k

Making the most of your 401(k) or other tax-advantaged workplace accounts can be a powerful retirement savings strategy, experts say.

In part, that's because it has a higher contribution limit than an individual retirement account (IRA).

But maxing out your 401(k) contributions takes some doing: In 2024, just 14% of participants did so, according to Vanguard’s latest How America Saves report.

How maxing out your 401(k) can add to your balance at retirement

Markets can fluctuate but you shouldn’t let temporary volatility dissuade you. The most powerful asset you have as an investor, experts say, is time. The earlier you get started, the more years you have for the effects of compounding interest to potentially grow the value of your portfolio.

Over time you could see an average annual growth of 5% to 10%, adjusted for inflation. 

3 tips to reach ‘retirement supersaver’ status

So-called retirement “supersavers,” according to Principal Financial Services are those who are able to max out their annual retirement contributions or come close to it, or sock away at least 15% of their salary.

If you want to boost your contributions, here are a few expert-recommended tips that could help:

Opt in to automatically increase your contributions 

Some companies offer a 401(k) feature called auto escalation, which sets your contributions to increase automatically at set intervals. Consider signing up. “Anything you can do so [funds] automatically go toward retirement” is a good idea, said Mark Prendergast, a CPA and CFP who is also the director of tax strategies at Inspired Financial in Huntington Beach, California.

Commit to banking part of future raises and windfalls

“Earmarking raises toward your retirement is a surefire way to up the annual contribution until reaching the max each year,” says Louisiana-based CPA Riley Adams. “This forces you to live on your current salary and either make trade-offs to less-costly substitutes while maintaining your current cost of living to counteract inflation, or making adjustments in your lifestyle to offset rising consumer prices.”

Make the most of your employer match

Employers often offer a 401(k) match, which means they’ll contribute a certain amount of money to your account based on how much you put in, as an incentive for workers to save. Most plans match between 3% and 6%, with a median value of 4%, according to Vanguard.

But many Americans miss out what’s essentially free money by not contributing enough to get their full company match.

To add some perspective, a worker with a $50,000 annual salary who forgoes a 4% company match would miss out on $2,000 that could be growing for their retirement.

This content is for informational purposes only and is not intended as investment advice. The strategies and investments discussed may not be suitable for all investors.  Hypothetical examples were presented to show the potential impact of long-term investing and compound returns with returns compounded monthly.  Such results do not represent the performance of any Acorns portfolio and do not take into consideration economic or market factors which can alter performance.  Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions.