What is the maximum I can contribute to my 401(k) in 2025?

For 2025, the employee contribution limit is $23,500. If you are age 50 or older, you can add a 'catch-up' contribution of $7,500, bringing your total to $31,000. These limits typically increase slightly each year to account for inflation.

What happens to my employer match if I leave my job?

This effectively depends on your 'Vesting Schedule'. If you are 'fully vested', you keep 100% of the employer's match. If you are 'grading vesting' (e.g., 20% per year), and you leave after 2 years, you only keep 40% of the match money. You ALWAYS keep 100% of the money you contributed yourself.

Should I invest in a Traditional or Roth 401(k)?

It depends on your tax bracket. Traditional 401(k)s give you a tax break TODAY (good if you are a high earner now). Roth 401(k)s require you to pay tax now, but withdrawals are tax-free in retirement (excellent if you are young and expect your income/taxes to rise).

What should I invest in within my 401(k)?

Most experts recommend low-cost Index Funds or Target Date Funds. Avoid keeping your 401(k) money in 'Cash' or 'Money Market' funds where it won't grow. Look for an S&P 500 equivalent or a Total Stock Market Index Fund with an expense ratio below 0.10%.

Can I withdraw money from my 401(k) for a house?

Yes, but it's costly. You can take a '401(k) Loan' (borrowing from yourself) up to $50,000 or 50% of your vested balance. Alternatively, you can make a withdrawal, but you will pay income tax PLUS a 10% early withdrawal penalty if you are under age 59½. It is generally advised to leave retirement funds alone.

401(k) Growth: Your Ticket to Millionaire Status

The 401(k) isn't just a boring workplace perk. It is arguably the most powerful wealth-building vehicle in American history. By leveraging tax advantages, free money (matching), and compound interest, becoming a millionaire is not just possible—it's mathematically probable.

Project Your Nest Egg

Stop guessing. Use our calculator to see exactly how much your contributions will grow by age 65.

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Why the 401(k) is a Superweapon

A 401(k) allows you to invest roughly $23,000+ per year with special tax shielding. In a normal brokerage account, you earn money, pay tax on it, invest it, and then pay tax again on the gains. In a 401(k), you skip at least one of those tax bills.

1. The Employer Match (Free Money)

If you take nothing else from this article, remember this: Always contribute enough to get the full match.

Example: You earn $100,000. Your employer matches 100% of contributions up to 4% of your salary.

You put in: $4,000
Employer adds: $4,000
Total Investment: $8,000

You just made an instant, guaranteed 100% return on investment. There is no other investment in the world that guarantees 100% returns on day one.

The Math to $1 Million

Becoming a 401(k) millionaire doesn't require a CEO salary. It requires time and consistency. Let's assume an average annual return of 8% (the S&P 500 historical average is ~10%).

Starting Age	Monthly Contribution	Amount at Age 65
22	$300 / mo	$1,067,000
30	$600 / mo	$1,032,000
40	$1,350 / mo	$1,003,000
50	$3,500 / mo	$1,005,000

*Assumes 8% annual growth, compounded monthly. Inflation is not factored in, so these are nominal dollars.

Notice the penalty for waiting. If you start at 22, you only need to save $300/mo. If you wait until 40, you have to save over 4x as much to reach the same goal. This is the Cost of Waiting.

Important Concept: Vesting Schedules

"Vesting" refers to ownership. You are always 100% vested in your own contributions. However, the money your employer puts in (the match) often follows a schedule.

The "Golden Handcuffs"

Graded Vesting Example:
Year 1: 0% vested
Year 2: 20% vested
Year 3: 40% vested
...
Year 6: 100% vested.

If you leave after 3 years, you walk away with only 40% of the match money. Always check your employee handbook before quitting a job!

Investment Choices: Where does the money go?

A 401(k) is just a bucket. You have to choose what to put inside it. If you leave it in the default "Money Market" fund, it will earn ~2-3% and lose value to inflation.

The "Set It and Forget It" Strategy

Target Date Funds (TDFs): These are mutual funds named by a year (e.g., "Retirement Fund 2060"). They automatically adjust risk. When you are young, they hold 90% stocks (aggressive). As you approach retirement, they shift to bonds (conservative). This is the easiest way to invest.

The "DIY" Strategy

If you want lower fees, you can build your own "Three-Fund Portfolio":

US Total Stock Market Index: (e.g., VTSAX) ~60%
International Stock Market Index: (e.g., VTIAX) ~30%
US Bond Market Index: (e.g., VBTLX) ~10%

The goal is to pay the lowest "Expense Ratio" possible. Try to keep fees under 0.10%.

Advanced: Traditional vs. Roth 401(k)

Traditional 401(k)

Tax Break: NOW

You pay taxes when you withdraw (Age 59.5+).

Best For: High earners who want to lower their tax bill today.

Roth 401(k)

Tax Break: LATER

You pay taxes now. Withdrawals are 100% tax-free.

Best For: Young workers or those who expect taxes to go up in the future.

Conclusion

The path to becoming a 401(k) millionaire is simple, but not easy. It requires the discipline to live on less than you make and the patience to let compound interest work its magic over decades.

Log in to your 401(k) provider today. Check your contribution rate. Can you bump it up by 1%? That small action today could be worth $50,000 in your retirement.