Get the match first
A common employer 401(k) match is 50% of contributions up to a set percentage of salary — effectively an immediate, guaranteed return before any market performance is involved. Contributing less than the full match amount typically means leaving part of your compensation unclaimed.
Roth vs. traditional
| Traditional | Roth |
|---|---|
| Contributions reduce taxable income now | Contributions made with after-tax income |
| Withdrawals in retirement are taxed | Qualified withdrawals in retirement are tax-free |
| Often favored if you expect a lower tax bracket in retirement | Often favored if you expect a similar or higher bracket later, or want tax diversification |
Many people split contributions between both types over their career, since nobody can predict future tax rates with certainty — having both gives flexibility on which account to draw from later.
How much is actually enough
Guidance varies, but a widely cited target is saving roughly 15% of pre-tax income for retirement, including any employer match, starting as early as possible. Starting a decade later can require a substantially higher contribution rate to reach the same eventual balance, since compounding has fewer years to work.
Common mistakes
- Cashing out a 401(k) when changing jobs instead of rolling it over
- Leaving contributions on autopilot at the plan's default rate, which is often below the full match threshold
- Ignoring fund expense ratios inside the plan — a seemingly small fee difference compounds significantly over decades