Only 14% of Workers Achieve This 401(k) Benchmark—Here’s How to Set It as Your Target

• A study by Vanguard shows that only 14% of participants max out their defined contribution retirement plans (such as 401(k)s).

• High earners are more likely to maximize their 401(k) plans, but you can achieve this even if your income is modest.

• The power of compounding returns means you have a strong incentive to save money as quickly as possible.

The reality of the U.S. retirement system is that most workers are chronically undersaved. A Federal Reserve survey found that only about one-third of nonretirees said they believed their retirement savings plans were on track by 2024.

Still, many workers are struggling to save and invest for retirement. According to Vanguard’s 2025 report, an estimated 14% of participants in defined-contribution (DC) plans with Vanguard as recordkeeper have paid their annual maximum for employee elective deferrals. Defined contribution plans include 401(k)s and 403(b)s.

The annual maximum limit in 2026 (excluding employer contributions) is $24,500. But if you’re 50 or older, it’s $32,500, with the maximum limit rising to $35,750 for workers aged 60, 61, 62 and 63 under changes brought by the SECURE 2.0 Act.

While saving less than the maximum doesn’t mean you’re guaranteed to miss out on retirement planning, reaching this goal can help you achieve a more secure retirement, especially if you have a limited number of years to save in a DC plan.

“Ultimately, how much a person should contribute depends on their unique financial situation and retirement goals, but in general, if your only source of retirement savings is your retirement plan, you should maximize it whenever possible,” said Meg K. Wheeler, CPA and founder of the Fair Money Project.

As you’d expect, higher earners can generally have an easier time contributing the maximum amount to their retirement savings plans. That’s exactly what Vanguard found; about half (49%) of plan participants making more than $150,000 a year reached the top income bracket, compared with only 2% of plan participants making $75,000 to $99,999 a year.

Still, even if your income is modest, you can work to maximize your 401(k) account contributions to take advantage of benefits like employer matching funds and compound interest. The sooner you save your money, the more time you have for compound interest to work its magic.

Let’s say you’re 25 years old and save up to your limit for the next five years until you turn 30. For simplicity, assume that the account is worth $100,000 at this time. If you saved another dollar and allowed the account to grow at an average rate of return of 10%, you would have more than $2.8 million by age 65.

By contrast, assuming you start saving for retirement at age 30, you don’t have $100,000 in your 401(k) until age 40. Even if you continue investing $1,000 a month until age 65, you’ll end up with more than $500,000 in savings.

Making some sacrifices early in your career to maximize your contribution can pay off significantly later down the road. Lost time will be difficult to make up for later.

And, you never know what will happen in your career. For example, maybe you go to work for a startup that doesn’t offer a retirement plan. In this case, you may want to invest more money in your 401(k) plan. This is especially true considering that DC plans have much higher contribution limits than many other types of accounts. For example, the annual contribution limit to an Individual Retirement Account (IRA) is $7,500 through 2026 ($8,600 for those 50 and older).

“The reality is that most people are not saving enough for retirement, and for Americans, with uncertainty surrounding the future availability of Social Security funds, saving as much as possible for retirement is not a bad place to start,” Wheeler said.

Saving tens of thousands of dollars every year isn’t easy. However, there are ways to get closer to this goal with a more modest income.

1. Watch your cash flow. “Expenses can add up over time, so practicing good budgeting habits and reviewing your spending regularly can make a big difference,” says Amanda DeCesar, CFP and co-founder of Tara Wealth. “Small adjustments — adjustments to raises, bonuses, or even cuts to recurring expenses — add up over time,” she says.

2. Make the most of your employer-sponsored plans. Many employers will match your contributions up to a certain limit, so try to hit at least that limit. You can also sign up for automatic contributions to help you maintain consistent savings. The benefit of this is that it takes some of the emotion out of retirement planning.

3. Be realistic about what works for your situation: “The key is balance,” DeCesare said. Consider other financial goals, such as building an emergency fund or a mix of traditional and Roth retirement accounts. “A comprehensive approach to saving can increase tax efficiency and financial flexibility now and in retirement,” she said.
   

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