The amount you contribute depends on your salary, your retirement goals, and how much you can afford to live on now
There is no single right answer. The IRS sets a maximum you can contribute each year — $23,500 in 2024 for most people, or $30,500 if you are 50 or older — but you can contribute anywhere from zero to that limit. What matters is finding the amount that balances three things: how much you need to retire, how much you can spare from your paycheck now, and what your employer will match.
Most people start by looking at what their employer contributes. If your school or nonprofit matches a percentage of your salary, contributing enough to capture that match is almost always the first step. After that, the decision becomes personal — it depends on your other savings, your age, and when you want to stop working.
Key Takeaways
- If your employer matches contributions, contribute at least enough to get the full match — that is when ready, may provide money added to your account.
- A common guideline is to save 10 to 15 percent of your gross salary across all retirement accounts, though the right amount depends on your situation.
- You can change your contribution amount at any time during the year, so you do not have to guess perfectly on day one.
- Contributing more now means less take-home pay today but more money available when you retire.
- If you are behind on retirement savings, catch-up contributions allow you to put in an extra $7,500 per year once you turn 50.
Start with your employer match
Most schools and nonprofits that offer a 403(b) will match a portion of what you contribute. The match is usually described as a percentage — for example, "we match 100 percent of the first 3 percent you contribute" or "we match 50 percent of the first 6 percent."
If your employer matches, the minimum you should contribute is whatever amount captures the full match. If they match 100 percent of the first 3 percent of your salary, you should contribute at least 3 percent. If you contribute less, you are leaving information programs on the table. If you contribute more than the match threshold, the extra does not get matched, but it still goes into your account and grows tax-deferred.
To find your employer's match formula, check your benefits handbook or ask your payroll or human resources department. The match is one of the few may provide returns you will get on retirement savings.
How much to save overall: the 10 to 15 percent rule
Financial advisors often suggest saving 10 to 15 percent of your gross salary for retirement across all accounts — your 403(b), an IRA, and any other retirement savings combined. For someone earning $50,000 a year, that would be $5,000 to $7,500 per year. For someone earning $80,000, it would be $8,000 to $12,000.
This is a guideline, not a requirement. It assumes you are starting to save in your mid-20s and will work until around 65. If you started saving later, you may need to save more. If you have other sources of retirement income — a pension, Social Security, or substantial savings already — you may need to save less.
The 10 to 15 percent rule also assumes you want to replace about 70 to 80 percent of your pre-retirement income when you stop working. If you plan to live on less, you can save less. If you want to maintain your current lifestyle in retirement, you may need to save more.
Adjust based on your age and timeline
If you are in your 20s or 30s, you have time for your money to grow. Even small contributions compound over decades. If you are in your 50s or 60s, you have less time, so you may need to contribute more to reach your goal — or you may need to adjust your retirement timeline.
The IRS recognizes this with catch-up contributions. Once you turn 50, you can contribute an extra $7,500 per year beyond the standard limit. So in 2024, someone 50 or older can contribute up to $30,500, compared to $23,500 for younger workers. If you did not save much earlier in your career, catch-up contributions give you a way to accelerate.
Use a retirement calculator — many are free on websites like Fidelity, Vanguard, or the Social Security Administration — to estimate how much you need to save based on your current age, expected retirement age, and desired retirement income. These calculators are rough, but they give you a starting point.
Consider your take-home pay and living expenses
Contributing to a 403(b) reduces your paycheck. Money goes in before taxes, which lowers your federal and state income tax for the year, but you still see less money in your bank account each pay period. You need to make sure you can cover your rent, food, childcare, and other expenses on what is left.
If you are living paycheck to paycheck, a high contribution might force you to go into debt or skip other financial goals like building an emergency fund. In that case, start with the employer match and increase your contribution gradually as your salary rises or your expenses fall. A smaller contribution you can sustain is better than a large one you have to stop after a few months.
If you have high-interest debt — credit cards, for example — you may want to pay that down before increasing your 403(b) contribution. The may provide return from paying off a credit card at 20 percent interest is higher than the uncertain return from the stock market.
What happens if you contribute too much or too little
If you hit the IRS limit before the end of the year, your payroll will stop taking contributions automatically. You do not owe a penalty — the limit exists to prevent over-contribution. If you want to contribute more, you can open a traditional or Roth IRA, which has its own separate limit ($7,000 in 2024, or $8,000 if you are 50 or older).
If you contribute too little, the main consequence is that you may not have enough saved when you retire. There is no penalty for under-contributing. However, if you realize mid-year that you are not on track, you can increase your contribution amount for the rest of the year. Most plans allow you to change your contribution rate whenever you want.
If you leave your job before the end of the year, your contributions stop. You keep the money already in your account, but you do not get to contribute for the months you are no longer employed there.
How to change your contribution amount
Contact your payroll or benefits department and ask for the form to change your 403(b) contribution rate. Some employers let you do this online through a benefits portal; others require a paper form. You can usually change your contribution once a month or once a quarter, depending on your plan.
Changes typically take effect in the next pay period or within a few weeks. If you want to increase your contribution for the rest of the year, do it sooner rather than later so the extra money has time to grow. If you want to decrease it, you can do that at any time without penalty.
Frequently Asked Questions
What if my employer does not offer a match?
You still benefit from the tax deferral — your contributions reduce your taxable income for the year. Without a match, the decision is purely about your own retirement goals and how much you can afford to save. Start with whatever amount you can sustain, even if it is just 2 or 3 percent of your salary, and increase it as your income grows.
Should I max out my 403(b) or save money for other things?
Maxing out is not necessary for most people. Prioritize capturing your employer match, then build an emergency fund with three to six months of expenses. After that, decide whether to increase your 403(b) contribution or save for other goals like a home down payment or paying off debt. The order depends on your situation.
Can I contribute the same amount every month, or does it have to change?
You can contribute the same amount every month if you want. Many people set a percentage of their salary and leave it alone. Others adjust it once a year or when their salary changes. There is no requirement to change it — set it and review it annually.
What if I get a raise — should I increase my 403(b) contribution?
A common strategy is to put half of any raise into your 403(b) and keep the other half as increased take-home pay. This lets you save more without feeling a drop in your paycheck. But you can also keep your contribution the same and enjoy the full raise, or increase your contribution by any amount that feels right for your situation.
Is there a penalty if I do not contribute enough to retire?
No penalty from the IRS. However, if you do not save enough, you may need to work longer, reduce your spending in retirement, or rely more heavily on Social Security. That is why starting early and saving consistently matters — it gives you options later.