FAQ: I’m just starting my first job and my employer offers a 401k with a match. How much do you think I should contribute each paycheck?

Answer: We are so glad to see that as a young person you are thinking about your future. The most important factor to successful retirement savings is time. Allowing your assets decades to compound can create an almost magical account balance when the time comes that you need your funds. Essentially, the sooner you start, the better.

We will break our recommendations into two parts so you can decide based on your current situation.

Minimum: At the very least, contribute enough to take advantage of your employer’s match. This is free money that you do not want to miss.

Ideal: Typically, we recommend saving 10%-15% of one’s salary in their 401k. This will provide you with a significant nest egg if you have 30+ years of growth compounding building the account. If you are saddled with debt or have not yet built your emergency reserve, 10% is sufficient to allow you to have some cash for other important financial priorities. However, if you have little or no high-interest debt and you have at least a decent emergency reserve (3-6 months’ worth of living expenses), then 15% or even more can really supercharge your retirement savings at this young age.

If you decide to start with a lower saving percentage, do yourself a favor and make it a priority that each January you will increase your savings 1% per year until you reach a higher percentage in the ideal range. The slow increases will be almost completely unnoticed in your paycheck and will most likely be offset by raises or cost of living adjustments to your salary. After only a few years you will be a savings superstar!

Read our Comprehensive Guide to Retirement Planning in New Jersey for helpful answers to common retirement questions.