It’s not uncommon for retirees to feel behind with their savings. A reported 60% of Americans feel they have enough income and assets to last through retirement, according to Pew Research.
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One way many Americans can build more confidence is by maxing out their 401(k) contributions each year. Perfection isn’t the goal, but wise behavior is vital. Retirees with larger 401(k) balances tend to contribute more earlier and take advantage of the power of compound interest.
What Maxing Out Means in 2026
The maximum contribution amount for a 401(k) account is not a fixed number. It’s possible for the amount to increase, and it has over the years. For the 2026 tax year, the IRS allows Americans to contribute $24,500 to their employer-sponsored 401(k) plans.
Employer contributions don’t count towards this cap. By maxing out your 401(k), you avoid leaving free money on the table. The IRS also allows Americans over 50 to make a catch-up contribution, and those aged 60 to 63 can make a super catch-up contribution. Those amounts for 2026 are an additional $8,000 and $11,250, respectively.
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How Much Will a Retiree Have If They Max Out Their 401(k)?
Beginning to max out your 401(k) account as soon as possible gives your money more time to grow. Contributions later in life matter too, but time is the key. Earlier contributions are more powerful because they have more time to grow. However, the average American contributes 7.7% of their salary to a 401(k) plan, according to Vanguard.
To determine how much you’ll have if you max out your 401(k) account, use an example salary of $80,000. Contributing $24,500 annually, assuming 26 paychecks per year, over the course of 25 years, you would have $1,601,141, assuming a 7% return. This amount doesn’t account for catch-up contributions.
What happens for Americans who contribute the average of 7.7%, on the same $80,000 example salary? Workers would contribute $6,160 annually, and with the same variables, they would have $402,573, or $1,198,568 less.
Amounts will vary for workers, depending on investment choices, catch-up contributions and the number of years you max out the 401(k) account.
Why Maxing Out a 401(k) Plan Works
Contributing to and maxing out a 401(k) plan is one of the most powerful things Americans can do for their retirement planning. Contributions can either be pre-tax or after-tax, depending on whether you opt for a traditional or Roth 401(k) account.
401(k) contributions are commonly automated, creating consistency and eliminating the need to rely on willpower. There’s also a behavioral component to contributions. Your money goes into your account before it hits your checking account, so it eliminates unnecessary spending that derails your saving efforts. And the longer your funds stay invested, the longer compound interest works for your benefit.
How To Get Closer to Maxing Out a 401(k)
The thought of maxing out a 401(k) account can seem overwhelming for many. Only 14% of workers did so in 2024, per Vanguard. It’s important not to let the apprehension hold you back, though. There are thoughtful ways to stair-step your way to maxing out your 401(k) plan.
Consider increasing contributions by 1% quarterly or semi-annually until it’s uncomfortable. You can even pause and adjust contributions if necessary. If you receive a raise, commit to a set percentage of the money to go towards the 401(k) plan to avoid lifestyle inflation.
Creating a calendar reminder to review contributions is another helpful way to review your ability to increase. Regardless of what steps you take, prioritize earning the employer match as that’s free money, then work towards maxing out the plan.
A 401(k) plan can be a powerful tool for optimizing retirement planning. The sooner you start saving more, the more time it has to grow and work in your favor.
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This article originally appeared on GOBankingRates.com: Retirees Who Did This One Thing Have $1.6 Million More — Here’s What It Was
