If you’re already enrolled in your 401(k), then you’ve taken the most important step. But that doesn’t mean you can sit back and relax just yet. Most employers set the contribution rate fairly low — typically around 3% — which won’t be enough in the long term if you want to save enough to retire comfortably.
That means it’s your job to determine how much money you should contribute to your retirement fund. At the very least, make sure you contribute enough to earn the full employer match — otherwise, you could be leaving money on the table. Then try using a retirement calculator to figure out how much you should save each month to reach your long-term goals.
It’s a good idea to test out a few different calculators to get a better estimate of how much you’ll need. All calculators are different (some factor in Social Security benefits, for example, and they may or may not account for factors such as taxes and inflation), and you’ll likely get different results depending on which one you use. Keep in mind that all of these numbers are estimates, but they’re a good starting point.
Once you have a ballpark idea of how much you should be saving each month, adjust your 401(k) contributions accordingly. Also remember to tweak your contributions when you experience any important financial event, such as when you get a raise or start a new job with a higher salary.
It’s easy to put off retirement saving for another day, waiting until you start earning more money or have more time to sit down and figure out how much you should be contributing. But the longer you wait, the more valuable time you lose — and that could ultimately cost you tens of thousands of dollars down the road.