Maxing Out Your 401(k) May Not Be Enough—This Expert Gives Critical ‘Stress-Testing’ Tips

Maybe you’ve recently started the career of your dreams, and you think you have all the time in the world to prepare financially for retirement. Or you might be approaching retirement, and you’re eyeing that horizon with a bit of trepidation because you don’t think you’ve saved enough. In either case, you might consider maxing out your 401(k).

But will maxing out your 401(k) contributions give you all the money you’ll need in retirement? Perhaps not. Many obstacles in retirement stand ready to deplete your savings, from greater-than-planned-for expenses to diminished purchasing power due to inflation.

To get a firm idea of what you may face, you’ll need to size up your future personal circumstances and required finances. Keep reading to learn more about whether your 401(k) will provide you with enough money to retire.

What’s a 401(k)?

A 401(k) is a retirement account that’s typically offered by employers, although self-employed individuals can set up a one-participant or solo 401(k) plan for themselves if they have no employees.

A 401(k) can be a traditional, SIMPLE, or safe harbor plan, each of which comes with its own conditions and terms. The money that you contribute to a traditional 401(k) is pre-tax income—that is, it comes from your earnings before you pay taxes on them. Your contributions are tax-deductible and reduce the amount of your taxable income.

Some employers will generously match the contributions you make to your plan by a certain amount. As long as you continue working for the company for a predetermined number of years or longer, the money will vest (meaning, it becomes your property). If you leave the company before that time, your employer will take back any unvested amount.

Maxing Out Your 401(k)

You might be tempted to throw every dime you can spare into your 401(k) plan to finance a sweet and comfortable retirement, but unfortunately, that’s not permitted. The Internal Revenue Code (IRC) places a cap on how much you can contribute to your plan annually, although these limits are adjusted each year to reflect inflation.

The limit is $23,500 for tax year 2025, up from $23,000 in 2024. It’s very much to your benefit to contribute the maximum amount allowed each year if you can, so that you build the value of your account as much as possible over time.

If you’re age 50 to 59, you can contribute an additional $7,500 for a total of $31,000 a year. You can contribute even more under the terms of the SECURE 2.0 legislation if you’re age 60, 61, 62, or 63: an extra $11,250 instead of $7,500.

While maxing out your 401(k) involves contributing the maximum amount allowed each year, the good news is that your employer match isn’t included in the annual savings limit. It adds to it, up to a $70,000 combined limit annually if you’re under age 50, $77,500 if you’re age 50 to 59, or $81,250 if you’re age 60 to 63.

Will You Save Enough by Maxing Out Your 401(k)?

It’s important to determine whether maxing out your 401(k) will provide you with enough money during your retirement years. There’s a good chance that it won’t, and as a result, you should consider other investment options as well, such as a personal IRA and a taxable brokerage account. The sooner you open and set aside funds in these accounts, the longer they’ll have to work on your behalf to grow in value.

Some experts suggest that you should aim to save 10% to 15% of your salary each year. High earners most likely won’t get there by saving to a 401(k) alone due to the annual limits.

To determine whether your 401(k) funds will be enough, Matthew Mancini, Wealth Plan Team Leader at Wilmington Trust, suggests stress-testing your financial plan for retirement. “It can help to answer the ‘what if’ questions,” he says. “What if I spend more than I’m budgeting for? What if inflation is higher than anticipated? Stress-testing a plan by altering assumptions can help to either confirm that your plan can withstand disappointing circumstances or that you may have to make some changes.”

Consider how much you think you’ll need to retire comfortably. What will your monthly expenses and spending be? Will your mortgage be paid off by the time you retire? Try to anticipate your future transportation needs. Don’t neglect to factor in the inevitable costs of healthcare services and insurance.

“You want to test those variables that are more unpredictable,” Mancini says. “Add some unexpected expenses to see how your portfolio and income can handle those inevitable large ‘one-off’ expenses. One such expense is a long-term care event in a nursing home.”

Massachusetts Mutual Life Insurance Company provides a retirement savings calculator online to help you figure out how much you’ll want to save for retirement based on your personal circumstances. USA.gov offers worksheets, and your 401(k) plan might provide tools and calculators as well.

Some Other Considerations

You’ll want to keep a few other things in mind as well as you size up your future expenses and spending needs.

Required Minimum Distributions

You can’t keep those 401(k) funds stashed indefinitely. The Internal Revenue Service (IRS) mandates that you begin taking required minimum distributions RMDs and pay taxes on that money by April 1 in the year after the year you reach age 73. You generally can’t postpone your RMDs and leave the funds in your 401(k) until you need them. So, not only will you start depleting your retirement account (although you could reinvest what you withdraw), you’ll have to pay taxes on those withdrawals.

There’s a loophole here, however. You don’t have to start taking RMDs from your 401(k) if you’re still working and if you own less than 5% of the company where you’re employed. Not all plans accommodate this rule, so check with your employer to be sure.

You’ll face a 10% to 25% excise or penalty tax if you don’t take your RMDs, and this can further stress your retirement budget.

Other Tax Issues

Keep in mind that those contributions you’re making to max out your 401(k) are pre-tax dollars. They are deducted from your earnings and reduce your taxable income during your working years. As mentioned, taxes come due when you take withdrawals from your 401(k) in retirement. Be sure to factor this into your projected retirement budget, as well as state taxes if you live in one of the many states that impose them on retirement plan distributions.

And remember that you’ll still have property taxes to deal with if you own your home, even if you’ve paid off your mortgage by the time you retire. These taxes can be hefty in some areas of the country. If you know where you’ll be living in retirement, you can factor those taxes into your projected budget.

The Cost of Living

Then there’s that money-hungry beast: inflation. Due to its eroding effect on purchasing power over time, the dollars you contribute to your 401(k) today won’t stretch as far when you take withdrawals in retirement. U.S. inflation is measured by the Consumer Price Index (CPI). The CPI was 3.1% in July 2025.

Don’t neglect to factor in this decrease in savings value when you estimate future financial needs and compare those to what your 401(k) may deliver.

“Inflation will increase your expenses, which in turn could erode your savings,” Mancini says. “Health care costs or paying for grandchildren’s tuition are items that have historically increased at a rate higher than the typical inflation rate. So, it would be wise to build in inflation rates that are appropriate for the type of financial goals you’re looking to fund.”

The Bottom Line

You may need more than just a 401(k) to make ends meet comfortably in retirement, even if you max out your contributions annually. While you may also receive monthly Social Security benefits, that still might not be enough. What’s more, if the Social Security trust fund runs out of money by 2034 as projected, benefits could be reduced.

Consult a financial professional to explore additional options to build and diversify your retirement income. That way, you may be able to avoid scaling back your standard of living in retirement.