The most frequent question I receive from 401(k) participants is: “How much should I contribute?” My answer is always the same: “As much as you possibly can.” That never seems to satisfy anyone, so I typically go on to explain the following — which can help both employers and employees with their retirement planning.
There are different opinions on what participants should contribute. NerdWallet, for example, concluded a 22% 401(k) contribution rate is appropriate for millennials. Previous studies, by T. Rowe Price and Vanguard, indicated that participants should target a 15% 401(k) contribution rate to achieve retirement readiness. Why the big change? Future stock market returns are expected to be lower as a result of a slower-growing U.S. economy.
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