I have a spreadsheet that shows me some various statistics about my 401k and I notice that assuming an average overall growth of 10%, my 401k contribution will be less than 1% of the yearly gain of the investment in about 15 years.

Is there a "common number" where financial experts agree that putting money into the 401k is a negligible increase and therefore the money might be better used for other things like repaying debt or investing in other products like an IRA? Sub-1% seems like a sure thing to me, but is there more common wisdom of a higher number? Does it all relate to my tolerance for loss?

  • 1
    401's are pre tax money, so you effectively get a boost from the IRS. Are you taking this into account, as well as any employer match?
    – Pepone
    Sep 21, 2014 at 14:34
  • Is there an employer match? If so that can be a 50% immediate return.
    – JohnFx
    Sep 21, 2014 at 15:08
  • 50? Mine was 100%. A dollar for dollar match up to 6% of income. Sep 21, 2014 at 15:22
  • 1
    I've seen several different matching regimes over the years, and that's all from a single company, as they balanced the 401(k) program against the gradual cutback of the old-style pension. Note that this is something worth asking about when interviewing!
    – keshlam
    Sep 21, 2014 at 15:33
  • Unless I'm looking at the wrong sources, the contribution limit for an IRA is considerably lower than that of a 401(k). I'd say, stop contributing when the tax advantages are no longer useful to you (can't think of any examples...), or if you think you can get a significantly higher ROI from an instrument that's not available in your 401(k).
    – Aaronaught
    Sep 22, 2014 at 0:07

4 Answers 4


A fascinating view on this. The math of a 10% deposit and projected 10% return lead to an inevitable point when the account is worth 10X your income (nice) and the deposit, 10% of income only represents 1% of the account balance. The use of an IRA is neither here nor there, as your proposed deposit is still just 1% of your retirement account total. Pay off debt? For one with this level of savings, it should be assumed you aren't carrying any high interest debt.

It really depends on your age and retirement budget. Our "number" was 12X our final income, so at 10X, we were still saving. For you, if you project hitting your number soon enough, I'd still deposit to the match, but maybe no more. It might be time to just enjoy the extra money. For others, their goal may be much higher and those extra years deposits are still needed. I'd play with a spreadsheet and see the impact of reduced retirement account deposits.

Note - the question asks about funding the 401(k) vs paying down debt. I'd always advise to deposit to the match, but beyond that, one should focus on their high interest debt, especially by their 50's.

  • "your proposed deposit is still just 1% of your retirement account total" Is the key part of this answer. If making sure that this years contribution as a large part of an investment bucket; the best advice would be make a new bucket every year. Sep 22, 2014 at 12:16
  • This seems to be a behavioral trick to get the OP focused on the new bucket, right? Even when he passes the 10X savings number, that new bucket by itself will not be insignificant. Sep 22, 2014 at 13:28
  • Thanks for this, my question was more about how much principal I'm putting in when the compounding has become so ridiculous as to overshadow the principal input. As an example, if in my 54th year my deduction+employer match were to equal $10k, but the interest earned on the investment was $120k that year, then it might be better to have that $10k gross (before tax, obviously) in my pocket as the $7k it comes out as rather than negligibly increasing total investment value, or am I not thinking of this the right way? Sep 23, 2014 at 19:15
  • @PeterGrace - I thought I addressed the question as asked. I added some math to show my understanding that there's a point where you'd expect the deposits to be overshadowed by the return. Did i miss something? Sep 24, 2014 at 1:34

It's probably advantageous to stop depositing into a 401(k) when one is no longer receiving payroll deductions into them. Other than that, why would you want to give up the benefits?

Remember, 401(k) is just the kind of account. Most offer a variety of investment options within them, and let you move money between those, so you can rebalance to suit your currently preferred risk/return tradeoffs without having to break them open.

You might sometimes want to reduce your contribution for a while, if you have immediate cashflow needs elsewhere... but try to avoid doing that. Compound returns are a good thing, and the earlier the money goes in the more you get back from it.


You'd need to test the assumptions here - in effect you're saying that in 15 years your account will have a balance 10x your income. But normally you'd expect your income to grow over the years (e.g. promotions) and so you'd hope that your income in 15 years would be significantly larger than what it is now.

But, even in the case where your account eventually does grow to 10x your salary at that time, it may still be worth continuing to contribute. In effect, adding a further 1% to your account is boosting the "compounding return" on your account by 1% - after fees and risk free. This additional 1% "return" in effect makes your retirement plan safer - you either get a higher total return for the same investment mix, or you can get the same total return for a slightly safer investment mix.

In effect, you're treating your salary as a "safe" annuity and each year putting 10% of the "return" from that into your more risky retirement account.


The only time to stop saving money for retirement is when you have enough money to retire tomorrow. Not all of your "retirement savings" need to be in a 401k, it is just better if you can. Be sure to get as much as you can from the employer matching program. Unfortunately some employer matching programs discourage you from putting in too much. I've been able to max out the 401k contribution a number of times, which helps.

Remember: you are likely to live to 100, so you better save enough to live that long. I don't trust social security to be there. I recommend saving so that you end up with "enough to be comfortable" -- this is usually about 25x your current income - PLUS inflation between now and when you plan to retire (age 62 is a good target).

It is worth knowing your "retirement savings number". If you are making $100K per year now, you need to target $2.5M - PLUS allowance for inflation between now and when you plan to retire. This usually means you need to also arrange to make more money as well as save as much as you can and to use passive investing. Finance advisors are not worth it if you have less than $1M to invest.

  • 3
    Slightly disagree with the last paragraph. Yes, you need to know what savings will provide the income you need. But the exact number depends heavily on your lifestyle and ongoing costs -- I will not need to replace my entire salary for multiple reasons, among others that the house will be paid off. So the rule of thumb is 25x the annual income you will need, not necessarily 25x your current salary.
    – keshlam
    Sep 22, 2014 at 3:17
  • The time to stop saving for retirement is when you retire. Then start again if you go back to work.
    – keshlam
    Jun 25, 2016 at 20:56

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .