You're Ahead Of Most Workers If You Hit This 401(k) Benchmark

While many people do their best to save for retirement, it can be challenging to save as much money as you'd prefer. One of the ways to grow your retirement savings faster is by maxing out your 401(k) contributions. That may sound like a fairly straightforward solution, but only 14% of those with a 401(k) or 403(b) plan contributed the maximum amount allowed in 2024, according to Vanguard's 2025 How America Saves report. And saving is only part of the equation: Not contributing the maximum amount you can afford reduces the power of compounding, where you earn interest on the interest you accrue over time. Compounding, in addition to saving, essentially gives your 401(k) a multiplier effect that can boost your savings over many years.

Such a low percentage of people maxing out their 401(k) could play a role in why only 35% of workers thought their retirement planning efforts were on track in 2025, according to the Federal Reserve. These findings were echoed in a 2024 survey, which found a staggering 40% of people believe they're behind on their retirement savings, according to CNBC (via Survey Monkey). The same study also found that 52% of people expect to work in retirement in some capacity, and if that doesn't sound like an appealing retirement to you, maxing out your 401(k) can be one of the best ways to catch up on your retirement savings and put you ahead of most workers.

You might be asking yourself how people are able to max out their 401(k)s, particularly when the annual contribution limit set by the Internal Revenue Service (IRS) is a hefty $24,500 — or $32,500 for those 50 and older — in 2026. Vanguard's research suggests that earning enough income is a major factor: 49% of survey participants who earned $150,000 or more maxed out their 401(k) in 2024, compared to only 11% who earned more than $100,000 but less than $150,000. Regardless of your income, maxing out your 401(k) annually can get more difficult over time, as the IRS increases 401(k) contribution limits periodically. Taking advantage of these adjustments gives you the opportunity to contribute to and grow your savings even faster, but also raises the bar for how much you'd need to set aside each year to max out your annual contributions.

Ultimately, having a thorough understanding of your individual financial situation will dictate how feasible it is to max out your 401(k). Since most people under the age of 59 ½ cannot withdraw their 401(k) funds without a significant penalty from the IRS, it's essential to evaluate your budget to ensure maximizing your 401(k) contributions won't cause you any cash liquidity issues in the short term. Having the highest possible retirement savings balance is great, but some may find it more essential in the present to build an emergency fund or pay off high-interest debt, which can help you avoid the warning signs that you're not financially ready to retire.