If You Max Out Your 401(k) in 2024, How Much Money Will You End Up With in Retirement?

Investing in a 401(k) comes with tax breaks, as you're allowed to deduct contributions from your taxes in the year you put money into the account. There are limits to how much you can contribute each year, though. In 2024, those limits are increasing slightly compared to 2023.

In the 2024 year, you're allowed to contribute up to $23,000 if you're under 50 and can make an additional catch-up contribution worth $7,500 if you are 50 or over. This is a lot of money, but it can be well worth trying to max out your contributions. To understand why, consider how much money you'd end up with in retirement if you contributed the full amount to this investment account that's permitted in 2023.

Here's what would happen if you maxed out your 401(k) in 2024

If you max out your 401(k) in 2024, the money you put into your account will begin earning returns from the assets you buy. You'll keep those returns in your account and reinvest them, so you'll earn money on the money you got from your investments. This is called compound growth, and it helps you build wealth.

The maximum 401(k) contribution is a lot of money in 2024, so if you manage to hit that target, this year's contributions alone can make a huge impact on how much money you end up with -- especially if you have a lot of years until retirement for compound growth to work for you. The table below shows how much your maxed out contribution alone could end up being worth in 10, 20, and 30 years, assuming you earn a 10% average annual return (in line with the stock market's performance over the last 50 years).

As you can see, this single year's contributions could leave you much richer. And in reality, your company might offer a 401(k) match, so you could end up with much more than this. The amount of extra money that could come from your employer matching your contributions would depend on the maximum match you were entitled to, as most employers cap matching contributions at a percentage of your salary.

How to increase your 401(k) contributions

As you can see, a maxed out 401(k) can set you on the path to wealth -- especially if you're young when you put money into this account.

Now, many people can't afford to put $23,000 into a retirement account each year. But the more you put in, the more compound growth can work for you. So, unless you're already contributing the full amount you're allowed, you may want to work on increasing 401(k) contributions in 2024. You can do that by:

• Investing any raises you get. If you get a 2% salary increase, devote the entire raise or half of it to your retirement savings.
• Inching up your contributions. If you're currently contributing 10% of your income, talk to your company's human resources department about changing that to 11%. Then, in six months, do that again to contribute 12%. If you make slow changes, you may be able to adjust without really feeling it.
• Check your budget for areas you can cut spending. If you can eliminate a streaming service or reduce some other expense, devote the extra money to your 401(k).

The closer you can get to contributing the maximum allowable amount, the more money you'll end up with as a retiree and the more you can enjoy your golden years.