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| URL | https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/401k | |||||||||
| Last Crawled | 2026-04-15 07:35:20 (7 days ago) | |||||||||
| First Indexed | 2023-10-12 20:54:28 (2 years ago) | |||||||||
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| Meta Title | Fidelity 401(k) retirement savings | Fidelity NetBenefits | |||||||||
| Meta Description | We answer the question “What is a 401(k)?” breaking down how it works and offering answers about how to contribute to this retirement plan. | |||||||||
| Meta Canonical | null | |||||||||
| Boilerpipe Text | How much should I contribute to my 401(k)?
While it’s generally recommended that you try to save 15% of your income toward retirement, this amount may vary depending on several factors, such as your current financial situation, when you started saving, when you want to retire, and the kind of lifestyle you’re hoping to have in retirement.
If you’re at the beginning of your career,
it’s a great time to get a head start and lay the foundation for your retirement savings. At this point, even a small amount can help you reach your retirement goals later, as you have a long time to save and earn interest. Consider increasing your contributions even by 1% each year to work your way up. If your employer offers a match, make sure you're contributing enough to take advantage of that free money.
If you’re nearing the end of your career,
you have an opportunity to play catch-up by
maxing out your contributions
, if you’re financially able. You can also take advantage of the fact that after age 50, you have the option of contributing a certain amount over the standard 401(k) annual contribution limit.
If you’re a woman,
you may need to save differently for retirement. The reality is that due to various factors, such as longer average life expectancy and the greater likelihood of taking one or more career breaks for caregiving responsibilities, women face unique challenges in retirement planning.
In fact, more than 80% of people over the age of 85 are female.
1
This means that women are more likely to be alone in retirement and more likely to be solely responsible for their financial well-being at some point in their lives. All of this underscores the importance of proactive financial planning now.
If you care for others,
especially family members such as a partner or an adult child with an illness, a disability, or special needs, it’s essential to factor these responsibilities into your retirement planning. Providing intergenerational support can significantly impact your financial situation, and this requires careful planning to ensure both your future and the well-being of those you care for.
Financial planning: When figuring out your 401(k) contribution situation, consider any additional expenses associated with caregiving. These may include medical bills, special equipment, home modifications, and professional caregiving services. Adjust your savings goals to account for these costs. Remember that financial advisors are available to help you with this.
Resources and assistance: Be sure to explore available resources to ease the financial burden of caregiving. For example, government programs, community resources, and nonprofit organizations offer various forms of support for caregivers. Leveraging these resources can provide some financial relief, allowing you to allocate more money toward your retirement savings.
2 | |||||||||
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# What is a 401(k)?
## Key takeaways
### A 401(k) is a convenient way to save for your retirement because contributions can be automatically deducted on a pretax basis from your paycheck.
### If your employer offers a 401(k) match, you can use this perk to get even more out of your retirement savings.
### Even if you can only contribute a small amount to begin with, investing early gives your money the opportunity to grow long term.
A 401(k) is an employer-sponsored retirement savings plan with special tax benefits. This type of workplace savings plan has a lot of advantages—including a tax break and, sometimes, an employer match—that can help you more easily save and invest for your retirement.
#### Advantages of enrolling in your company’s 401(k) plan
- **It gives you a tax break:** The money you put into your 401(k) is taken out of your paycheck before taxes are deducted. This lowers the amount of income you’ll be taxed on each year.
- **It offers a lot of ways to help earn money for your future:** With your 401(k), you can choose from a variety of investment options—and you can adjust these as needed to meet your retirement goals. It also means your money has the opportunity to grow.
- **It’s convenient:** A 401(k) makes saving for your retirement easier because contributions are automatically deducted from your paycheck, so you don’t have to worry about setting aside money on your own. Also, because the money is taken out before you even see it, you’re less likely to miss it.
- **It goes where you go:** If you switch jobs, you can take your 401(k) with you—by rolling it over into an individual retirement account (IRA) or into your new employer’s plan. This allows you to continue growing your retirement savings without paying any penalties.
- **Your employer may contribute, too:** Some employers offer what’s called an employer match, which can add to your retirement savings without any added effort on your part.
#### How does a 401(k) plan work?
Once you’ve enrolled in your workplace savings plan, you’ll want to take the following steps:
1. **Decide how much you want to contribute**
What percentage of each paycheck do you want to put into your retirement account? Always try to contribute something, no matter how small the amount—remember, you can adjust this amount at any time. Even if you can only spare 1% of your salary at first, it can make a big difference to your future financial picture. Some companies offer the option of automatically increasing the percentage you contribute every year until you reach your goal—for example, to get the full employer match or to contribute the recommended 15% of your salary, which includes employer contributions.
There is an annual limit on how much you (and your employer) can contribute to your workplace savings plan—this amount is determined by the Internal Revenue Service (IRS).
2. **Choose your investments**
Your employer will give you options for the types of investments you can make with the money in your 401(k) retirement savings plan. These generally include a variety of mutual funds, which are a collection of stocks, bonds, and other securities overseen by a professional fund manager. Your options may also include target date funds, which are designed to adjust automatically to become more conservative as the funds reach the target retirement date and beyond to help reduce the risk of losses. The good news is, with both of these types of investments, you know a financial professional is overseeing the funds, so you don’t have to be an investment expert yourself to get the benefits.
3. **Continue to save and invest over time**
Even if you start off contributing a small amount, your money has the potential to grow due to the power of compounding returns—your investment can earn returns which then can continue to grow and you could earn even more on your balance. As your investments grow in the 401(k), you don’t have to pay taxes on those earnings until you start withdrawing it for retirement. Keep in mind that with investing comes risk. The value of your investments will fluctuate over time, and you may gain or lose money.
However, if you withdraw money from your 401(k) before the age of 59 1/2, be aware that you’ll not only need to pay taxes on the withdrawal, you’ll also generally be charged a penalty by the IRS.
#### My company offers 401(k) matching. What’s that?
Some companies offer a 401(k) match, which is essentially free money that your employer contributes to your 401(k) retirement savings plan.
**How an employer match works**
When you contribute a certain percentage of your salary to your 401(k), your employer will “match” your contribution up to a certain amount in order to encourage you to save for retirement. For example, your employer might add \$1 for every \$1 you contribute to your workplace savings plan, up to 3% of your salary—meaning that you’re actually saving the equivalent of 6% of your salary toward your future financial security.
#### How much should I contribute to my 401(k)?
While it’s generally recommended that you try to save 15% of your income toward retirement, this amount may vary depending on several factors, such as your current financial situation, when you started saving, when you want to retire, and the kind of lifestyle you’re hoping to have in retirement.
**If you’re at the beginning of your career,** it’s a great time to get a head start and lay the foundation for your retirement savings. At this point, even a small amount can help you reach your retirement goals later, as you have a long time to save and earn interest. Consider increasing your contributions even by 1% each year to work your way up. If your employer offers a match, make sure you're contributing enough to take advantage of that free money.
**If you’re nearing the end of your career,** you have an opportunity to play catch-up by [maxing out your contributions](https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/irs-retirement-plan-contribution-limits-401k-403b-457b?focus=None "maxing out your contributions"), if you’re financially able. You can also take advantage of the fact that after age 50, you have the option of contributing a certain amount over the standard 401(k) annual contribution limit.
**If you’re a woman,** you may need to save differently for retirement. The reality is that due to various factors, such as longer average life expectancy and the greater likelihood of taking one or more career breaks for caregiving responsibilities, women face unique challenges in retirement planning.
In fact, more than 80% of people over the age of 85 are female.1 This means that women are more likely to be alone in retirement and more likely to be solely responsible for their financial well-being at some point in their lives. All of this underscores the importance of proactive financial planning now.
**If you care for others,** especially family members such as a partner or an adult child with an illness, a disability, or special needs, it’s essential to factor these responsibilities into your retirement planning. Providing intergenerational support can significantly impact your financial situation, and this requires careful planning to ensure both your future and the well-being of those you care for.
- Financial planning: When figuring out your 401(k) contribution situation, consider any additional expenses associated with caregiving. These may include medical bills, special equipment, home modifications, and professional caregiving services. Adjust your savings goals to account for these costs. Remember that financial advisors are available to help you with this.
- Resources and assistance: Be sure to explore available resources to ease the financial burden of caregiving. For example, government programs, community resources, and nonprofit organizations offer various forms of support for caregivers. Leveraging these resources can provide some financial relief, allowing you to allocate more money toward your retirement savings.2
#### What’s the difference between a 401(k) and a 403(b)?
Understanding the different types of retirement plans your employer might offer is important. A 401(k) is a retirement savings plan offered by for-profit companies, while a 403(b) is offered by nonprofit organizations. Both types of plans allow you to save for your retirement, with the key difference being the type of employer that offers them.
#### What’s the difference between a 401(k) and an IRA?
A 401(k) is a retirement plan offered by employers, allowing you to save and invest part of your paycheck before taxes. On the other hand, an individual retirement account (IRA) is something that you set up on your own, giving you more control over your investments. While both types of plans help you save for your retirement, the main difference is that a 401(k) is tied to your job, while an IRA is something you arrange independently.
Whatever your situation or the amount you’re realistically able to put aside, saving for retirement is like investing in your future self. By having a solid plan that prioritizes both your short-term financial needs and your long-term savings goals for retirement, you’re taking steps today in support of your total well-being later.
## Get details about your retirement plan
Each plan has its own rules, so if your retirement plan is with Fidelity, log in or register to learn more about what you have.
[Log in or register](https://nb.fidelity.com/static/mybenefits/netbenefitslogin/#/login)
##
### [Building to retirement](https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/building-to-retirement)
We break down everything you need to know about 401(k) retirement savings plans.
 Article
### [What’s a 403(b)?](https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/403b)
Learn how a 403(b) differs from a 401(k) and get other retirement plan facts.
 Article
### [What if I can’t afford to contribute to retirement right now? Opens in a new window](https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/trouble-contributing-to-retirement)
Discover ways to save for retirement, even if you think you can’t afford it right now.
 Article
### [2026 contribution limits](https://nb.fidelity.com/public/nb/default/resourceslibrary/articles/irslimits?ccsource=dw_nb_pl401k_finwell_irslmts_20180105)
The IRS increased the yearly retirement plan contribution limit to \$24,500 for 2026.
 Article
1 Fidelity Investments, “The gender gap and retirement,” accessed July 15, 2024, https://www.fidelity.com/learning-center/personal-finance/gender-gap-retirement
2 “How to help Plan for healthcare in Retirement as a Caregiver,” State Farm, accessed July 15, 2024, https://www.statefarm.com/simple-insights/retirement/how-to-plan-for-retirement-as-a-caregiver.
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| Readable Markdown | How much should I contribute to my 401(k)?
While it’s generally recommended that you try to save 15% of your income toward retirement, this amount may vary depending on several factors, such as your current financial situation, when you started saving, when you want to retire, and the kind of lifestyle you’re hoping to have in retirement.
**If you’re at the beginning of your career,** it’s a great time to get a head start and lay the foundation for your retirement savings. At this point, even a small amount can help you reach your retirement goals later, as you have a long time to save and earn interest. Consider increasing your contributions even by 1% each year to work your way up. If your employer offers a match, make sure you're contributing enough to take advantage of that free money.
**If you’re nearing the end of your career,** you have an opportunity to play catch-up by [maxing out your contributions](https://nb.fidelity.com/public/nbpreloginnav/spa/fidelitywork/core/irs-retirement-plan-contribution-limits-401k-403b-457b?focus=None "maxing out your contributions"), if you’re financially able. You can also take advantage of the fact that after age 50, you have the option of contributing a certain amount over the standard 401(k) annual contribution limit.
**If you’re a woman,** you may need to save differently for retirement. The reality is that due to various factors, such as longer average life expectancy and the greater likelihood of taking one or more career breaks for caregiving responsibilities, women face unique challenges in retirement planning.
In fact, more than 80% of people over the age of 85 are female.1 This means that women are more likely to be alone in retirement and more likely to be solely responsible for their financial well-being at some point in their lives. All of this underscores the importance of proactive financial planning now.
**If you care for others,** especially family members such as a partner or an adult child with an illness, a disability, or special needs, it’s essential to factor these responsibilities into your retirement planning. Providing intergenerational support can significantly impact your financial situation, and this requires careful planning to ensure both your future and the well-being of those you care for.
- Financial planning: When figuring out your 401(k) contribution situation, consider any additional expenses associated with caregiving. These may include medical bills, special equipment, home modifications, and professional caregiving services. Adjust your savings goals to account for these costs. Remember that financial advisors are available to help you with this.
- Resources and assistance: Be sure to explore available resources to ease the financial burden of caregiving. For example, government programs, community resources, and nonprofit organizations offer various forms of support for caregivers. Leveraging these resources can provide some financial relief, allowing you to allocate more money toward your retirement savings.2 | |||||||||
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