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What if I can’t afford to contribute to my 401(k) right now?
What if I can’t afford to contribute to my 401(k) right now?

It can be tough to set aside money for retirement now. But even starting small can amount to significant savings over time.

Updated this week

We know it can be hard to pay for everyday expenses while also trying to save for retirement. But even if you can’t afford to contribute up to the annual 401(k) contribution limit, contributing something is always better than nothing.

It’s OK to start small to ensure you are taking advantage of compounded interest and any employer match that may be offered by your company.

📣 Even contributing just 1% of your income can amount to significant savings over time.

An example of how small savings can add up

Let’s say Peter works full time and earns $30,000 per year. He’s currently 22 and aims to retire in 40 years at age 62. If Peter never receives a raise for the next 40 years, he will earn $1,200,000, before taxes, over the course of his career.

If Peter decides to contribute 1% of his annual income, he’ll set aside $25 per month to his 401(k). With compound interest, where interest is reinvested over time, Peter will accumulate $60,264 by the time he reaches retirement.* By making these deferrals into his 401(k), Peter will receive the equivalent of 5% of his estimated lifetime earnings with just a 1% contribution.

If not now, when?

Of course, if you are unable to start contributing now, you can set a reminder to check in with yourself every few months to reassess your financial situation. You can change your contribution rate at any time.

In the meantime, learn more about the Saver’s Credit, which may provide additional tax incentives to help you save more now and for retirement.


* Example is for illustrative purposes only and assumes a 7% average annual rate of return.

This information is for general education purposes only and not intended to be tax advice.

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