Maximizing Your 401(k): A Smart Move for Your Future

In 2024, only a small group of people, about 14%, who have retirement plans like 401(k)s or 403(b)s, are putting in the highest amount allowed. This maximum amount is $23, 500 per year, but if you're over 49, it goes up to $31, 000, and even higher for older workers due to recent law changes. Why is this important? Because saving more now can make a big difference later. Even if you can't save the maximum, aiming for it can help secure your future, especially if you don't have many years left to save. Higher earners find it easier to save the maximum. Nearly half of those earning over $150, 000 a year do this, compared to just 2% of those earning between $75, 000 and $99, 999. But no matter your income, saving as much as you can is a good idea. It helps you take advantage of employer matches and the power of compound interest. Let's say you start saving the maximum at 25 and stop at 30. If your account grows to $100, 000 by then, and you don't add any more money but let it grow at 10% average return, you'd have over $2. 8 million by 65. That's the magic of compound interest!On the other hand, if you start saving at 30 and only reach $100, 000 by 40, even if you save $1, 000 every month until 65, you'd have over half a million dollars less. This shows how important it is to start early. Also, you never know what the future holds. You might switch jobs to a place without a retirement plan. In that case, you'd wish you had saved more when you could. Plus, retirement accounts like 401(k)s have higher contribution limits than other accounts, like IRAs, which only allow $7, 000 a year in 2025. If you've been putting off saving for retirement, aiming for the maximum can help you catch up. Most people aren't saving enough, and with the uncertainty of Social Security, saving as much as you can is a smart move. Saving tens of thousands a year isn't easy, but there are ways to get closer to this goal, even on a modest income.