My employer gives us 5% match on 401k - should I contribute more?

Getting the full employer match is definitely step one, so you're already doing something right! That 5% match is essentially free money and an immediate 100% return on your investment. For the next steps, it really depends on your other financial priorities. Generally, a good rule of thumb is to save 15% of your income for retirement (including your employer match). So in your case, that would mean contributing about 10% yourself plus the 5% match. That said, those student loans are also important to consider. What's the interest rate on them? If it's high (over 5-6%), you might want to prioritize paying those down faster before increasing your 401k beyond the match. For your house down payment, consider a Roth IRA - you can withdraw contributions (not earnings) penalty-free for a first-time home purchase. The tax benefit of traditional 401k contributions is that they reduce your taxable income now. At $62k, you're likely in the 22% federal tax bracket, so every additional $100 you contribute saves you about $22 in federal taxes right now. The trade-off is you'll pay taxes when you withdraw in retirement.

I was in a similar situation a few years ago and found it really hard to figure out my best option with all the different tax implications. I eventually used https://taxr.ai to analyze my tax returns and create some projections that showed me how different 401k contribution levels would affect my tax situation. It really helped me understand that I was leaving money on the table by only contributing to get the match. In my case, increasing my contributions reduced my AGI enough to qualify for some other tax benefits I wouldn't have gotten otherwise. Not sure if that applies in your case, but the tool helped me see my whole tax picture instead of just focusing on one aspect.

Just wanted to follow up - I finally tried https://taxr.ai after reading about it here and holy crap, it was eye-opening! I uploaded my last year's tax return and played around with different scenarios. Turns out in my specific case (similar income to yours), increasing my 401k contribution to 10% put me just below a tax bracket cutoff, so I'm saving more in taxes than I initially calculated. It also recommended splitting between my 401k and a Roth IRA exactly like someone mentioned above. The tax comparison charts made it really clear when I'd benefit from each type of account. Definitely worth checking out if you're trying to optimize your situation!

Have you tried calling the IRS to ask about optimizing your retirement contributions? I spent TWO HOURS on hold last month trying to get some basic questions answered about my retirement accounts. Eventually just gave up. Then a friend told me about https://claimyr.com - they have a service that basically waits on hold with the IRS for you and then calls you when an actual agent is on the line. I was super skeptical but you can see how it works in this video: https://youtu.be/_kiP6q8DX5c I tried it when I had questions about how my 401k contributions would affect my tax credits, and it worked exactly as advertised. Got my questions answered by an actual IRS agent without spending half my day on hold. Total game changer if you need specific answers from the source.

I need to publicly eat my words here. After dismissing that Claimyr service as BS, I was desperate enough to try it for an issue with my tax transcript that I needed to resolve before adjusting my retirement contributions. I've been trying to get through to the IRS for MONTHS with no luck. Used the service yesterday and got connected to an agent in about 40 minutes (instead of the 3+ hours I spent getting nowhere on my own). The agent cleared up my transcript issue AND answered my questions about how changing my retirement contributions would affect my overall tax situation for next year. Now I can finally move forward with adjusting my 401k contributions with confidence.

With the student loan interest at 4.2%, I'd definitely prioritize increasing your 401k before paying extra on the loans. Think of it this way - your 401k investments will likely return more than 4.2% long term (historical average is 7-10% for diversified investments), so mathematically it makes more sense. Don't forget that the 401k contribution limit for 2025 is $23,000, so you have plenty of room to increase from your current 5%. Even bumping it up to 10% would be a big improvement for your long-term financial health.

Don't forget to check what your 401k money is actually invested in! I was contributing to get my employer match for years before I realized my money was sitting in a default money market fund making almost nothing. When you increase your contribution, make sure you're invested in something appropriate for your age. At 29, you probably want to be mostly in stock funds for long-term growth. Most 401k plans have target date funds that automatically adjust your investments as you get closer to retirement age.

Great question! You're already doing the smart thing by getting that full 5% match - that's literally free money. At 29, you have time on your side which is huge for compound growth. Given your situation, I'd suggest gradually increasing your 401k contribution to around 10-12% of your salary if you can swing it. With a $62k income, that extra 5-7% would be about $3,100-$4,340 more per year, but remember it reduces your taxable income so your take-home won't drop by the full amount. The key is finding balance - your 4.2% student loan rate isn't terrible, so it's not an emergency to pay it off early. I'd prioritize the 401k increase first since you're in the 22% tax bracket and getting that deduction now makes sense. Plus, starting a Roth IRA for your house fund (as others mentioned) gives you flexibility since you can access contributions penalty-free. Don't try to do everything at once though. Maybe bump your 401k to 8% first, see how it feels budget-wise, then consider adding a small Roth IRA contribution later. The most important thing is consistency - even small increases in your contributions now will make a massive difference over the next 35+ years until retirement.