10 Reasons Not to Rely on Just a 401(k) for Retirement

May 9, 2021

The 401(k) has ample contribution limits. In 2021, you can contribute up to $19,500 or $26,000 if you're over 50 -- not including your employer match. That's enough for most savers, but then you might not be like most savers.

To avoid a lifestyle downgrade in retirement, you usually need to contribute 10% to 15% of your pay, starting in your 20s. If you wait until your 30s or 40s to start saving, you'd need a much higher contribution rate. If you try to do that while making six figures, you risk reaching the cap on 401(k) contribution limits. As an example, with income of $130,000, a 15% savings rate could be your max.

You can supplement the 401(k) contributions with IRA and HSA contributions. If you max out those, too, then save additional funds to a taxable brokerage account.