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Contribution Increases

Work retirement plans are usually set up so your contribution is taken as a percentage of your salary. For example, if you make $50,000 and elected to contribute 5% to your 401(k) plan, your contributions will add up to $2,500 per year. A contribution increase would mean you decide to contribute a larger percentage of your income.

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Because pensions have become less common over the decades, and Social Security does not provide a significant income, Americans must take control of their own retirement savings strategy. Most Americans need to increase the amount they contribute to a work retirement plan over time in order to reach their retirement goals. It’s typical to contribute a small percentage of your salary when you’re young and have a smaller salary. But as you mature and your salary increases, you can afford to make larger contributions – and you should build those increases into your budget.

Create a retirement savings strategy to decide when to increase your contributions. Try our calculator to see how much money you’ll need in order to pay for your retirement.

As a starting point, it’s common to increase your contribution by 1% each year or every time you receive a raise or promotion. If possible, you should increase your contributions enough over time that you’re eventually maxing out your contribution; maxing out means you’re contributing the maximum amount that the IRS will allow. See our Contribution Limits article for more information.


Contribution Auto-Increase

Lots of employers now offer contribution auto-increases. Each year, the auto-increase will automatically raise your contribution percentage by a specified amount – often by 1%. Most employers and industry experts encourage auto-increase enrollment because it’s an easy step toward saving enough for retirement.

Many plans require you to request auto-increases, but a growing number of plans enroll you in the auto-increase program and require you to opt out if you do not wish to participate. Contact your human resources department or retirement plan administrator to find out whether your plan has an auto-increase program.