If you max out your 401(k) in 2022, here's how much more money you could end up with for retirement

Taking these steps is a "surefire way" to reach the max each year.


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 you can put aside a lot: For 2022, savers can stash up to $20,500 in their 401(k), up from $19,500 in 2021. Catch-up contributions for investors 50 and older allow for an extra $6,500, for a total contribution of $27,000. Any free money your employer throws in doesn't count toward those totals.

For perspective, the IRA contribution limit for 2022 is just $6,000.

But maxing out your 401(k) contributions takes some doing: During 2020, just 12% 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.

Grow's retirement calculator estimates that over time you could see an average annual growth of 5% to 10%, adjusted for inflation. Some experts say you can safely use 8%, which has been roughly the compound annual growth rate of the S&P 500 since 1980.

If you contribute the maximum $20,500 to your 401(k) this year and assume 6% annual growth, here's how much that one year's effort could add up to by age 65, depending on your age:

  • Age 25: $224,628
  • Age 30: $166,533
  • Age 35: $123,463
  • Age 40: $91,532
  • Age 45: $67,859

In other words, if you're 25 years old and you max out your 401(k) in 2022, you could end up with nearly $230,000 more to help fund a comfortable retirement.

If you're age 50 or older, catch-up contributions can factor in, too. If you contribute the maximum $27,000 in 2022 and assume 6% annual growth, here's how much that one year's effort could add to your retirement balance by age 65, depending on your age:

  • Age 50: $66,261
  • Age 55: $49,124
  • Age 60: $36,419
What is a 401(k) match and how can you take advantage of it?

Video by Ian Wolsten

Use 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, Mark Prendergast, a CPA and CFP who is also the director of tax strategies at Inspired Financial in Huntington Beach, California, told Grow.
  • Commit to banking part of future raises and windfalls. About half, 51%, of human resources leaders say their organization expects average merit increases of more than 5% this year, according to survey from professional services firm Grant Thornton.

    "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.

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