Should I Max Out My 401(k)?

Deciding how much to contribute to your 401(k) can be confusing. Should you aim to max it out every year, or might there be better ways to use your money?

In this short video, Chad Chase breaks down the factors you should consider before maxing out your 401(k) contributions. He explains when it makes sense to contribute the maximum and when it might be smarter to prioritize other financial goals like paying down debt, building an emergency fund, or investing elsewhere.

Watch the video to get clear guidance on how to approach your 401(k) contributions based on your unique financial situation.

If you want personalized advice, Chad and the CGN Advisors team are here to help you build a retirement strategy tailored to your goals.

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Transcript

You're saving in your 401(k) for retirement, but do you want to know if you're saving enough? Hi, I'm Chad Chase from CGN Advisors, and today I'm addressing a question many of you have: Should I max out my 401(k) contributions?

Understanding the Basics of 401(k) Contributions

Let's first review some of the basics.

Each pay period, you can contribute tax-deferred dollars to your 401(k). For 2025, the annual contribution limit from the IRS is $23,500. If you're 50 or older, the limit is $31,000 annually, and if you're between 60 and 63, it's $34,750 per year.

Often, an employer matches your contribution between 4 and 6%. Between you and your employer, you can put away $70,000 or more per year, depending on your age and total compensation.

Should You Max Out Your 401(k) Contributions?

However, the question for you is: Should I max out my 401(k) contributions?

Well, the answer depends on your financial situation. If you can comfortably afford to meet the maximum contribution, you might consider doing so. If you can't, contribute at least enough to get the entire match from your employer. Otherwise, you're leaving money on the table.

Additional Retirement Strategies Beyond the Maximum

If you're already contributing the maximum or thinking about it, here are some additional strategies to consider.

Explore after-tax 401(k) contributions if your plan allows for a mega backdoor Roth strategy.

Balance your savings across tax-deferred, Roth, and taxable accounts for greater retirement flexibility.

Saving for retirement is important, but whether to max out your 401(k) depends on your other financial goals, like paying down debt, building an emergency fund, or investing the money elsewhere.

While you might want to save 5–15% of your pay in your 401(k), it might make sense to put less in your 401(k) and tackle other financial goals first.

Three Considerations for Maxing Out 401(k) Contributions

Here are three additional reasons to consider maxing out.

First, 401(k) funds generally can't be accessed without penalty before age 59.5. If you're targeting early retirement, it may be wise to also build up taxable savings that offer more access.

Second, heavily loading pre-tax accounts can result in large required minimum distributions in your 70s, which may increase taxes on Social Security and Medicare premiums.

And third, some 401(k) plans come with high-cost funds or limited allocation options. In those cases, excess savings might be more efficiently invested elsewhere.

When to Talk to a Financial Advisor About 401(k) Contributions

If you're asking, “Should I max out my 401(k) contributions?” a financial advisor can help you find the answer that's best for you. We'll review your tax strategies, retirement income planning, and where your next dollar might be most effective.

To schedule a meeting, call our Manhattan, Kansas, office at 785-340-3434 or our Rogers, Arkansas, office at 479-335-1034.

We look forward to connecting with you.