While the 401k (403b and 457b equivalent) is one of the best available retirement saving options for many people, only 30% of Americans fully maximize their value. I fault all of that on the lack of education and accountability.

There has been no shortage of social media influencers, scammers, and insurance salespeople tearing down 401ks. Why? Most are financially illiterate, parroting misinformation from salespeople. The confusion is gospel to those already apprehensive. It’s unfortunate because, in the last 11 years, my 401k made over $232,000.

There is a sentiment that 401ks have failed Millions of Americans. Unfortunately, that premise is built on a stack of flimsy cards such as the decline of pensions, and an increase in cost. In 2020-2022, it wasn’t unusual to hear someone withdrawing their full balance. Some up to $100,000. In the complete opposite track to building wealth, they took the cash at a loss (-40%) before the recovery (+100% by 2023). A recipe for making a bad situation worse.

Luckily, I stayed the course and the results are documented. 401ks and the like typically offer free money via matching contributions while the amount you contribute lowers your payroll, state, and Federal taxes. Most financial influencers don’t share their numbers, which prompted me to share mine. It’s easier to see the growth to grasp the power of an employer-sponsored plan.

Before that here are some easy employee benefit program vocabulary that you can use.

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401k Notes to Remember:

In 2025, the IRS contribution limit to a 401k, 403b, or 457b plan is $23,500.
There is a catch-up limit increase of up to $7,500 for those over 50 years old.
The SECURE Act 2.0 introduced a special catch-up contribution for those from 60-63 of $11,250.
Teachers (generally) with access to a 401k and 457b can invest in both because a 457b plan is considered a non-qualified retirement plan. Simply 457b plans aren’t part of the same tax code as the 401k and 403b plans which are collectively limited to $23,500. With this nuance, that’s a total of up to $47,000 tax-deferred in one year (and up to $62,000 for those over 50).
There is a 10% early withdrawal penalty if they’re under Age 59½. Additionally, normal taxes still apply to the amount withdrawn.
- Think of it like getting bonus income that wasn’t taxed before. An early withdrawal is a catastrophic 30% tax liability on your wealth.
- If you withdrew $100k early, it would generate a tax of nearly $30k.

The First 401k Mistake: One Decision, Multiple Impacts

Not sure when it happened to us, we started to believe that our actions functioned on a binary system, like walking into a room and turning on the lights. Life is far more complex. There are more ways to use your earned income than simply spending it.

When you contribute to your employer-sponsored plan (401k), you will likely have the option to get a matching contribution. On average, the amount is 3% of your contributions, however, I’ve seen as high as 12%. Not personally but I’ve seen someone else. That’s all free money.

Even a simple match of $115.38 biweekly sounds small. Over 40 working years at a rate of return of 9% that’s a nice compensation of over $1,050,000. Seriously, don’t leave free money on the table due to ego. The math with your contributions added in boosts your end balance of $2,000,000 with just $120,000 (total) invested.

Most people don’t know the math and end up making their first big mistake. That’s just the beginning. If your employer offers FREE money always take it. It makes no sense if you don’t.

Compounding One Financial Mistake After Another

You will be always tempted to take a “bigger paycheck.” People always find a reason not to contribute to their 401k. Most decide to use their money now since the idea of retirement seems so far away. They foolishly believe that their later self will do better. However, once we arrive at the future, we find that our future self is just an older version of the past self. In the end, the bigger paycheck yields more taxes and thus less money.

Here’s an example: two 22-year-old friends making $100k.

Let’s say Sam decides not to contribute anything to his 401k. Sam will have to pay an effective tax of 16.21%. Thus Sam would have to pay $13,841 in taxes, pocketing $86,159.

Let’s say Barry contributed $23,000 (2024 401k limit) instead. Barry’s new effective tax rate would be 14.07% for a tax owed of $8,781. This would allow him to pocket $91,219.

The difference is $5,060.

While it might sound insignificant now, over 20 years, Sam would have paid $101,200 more in taxes. Not just that, there is more. Barry also received that matching contribution of 3%. By 42, Barry would have a 401k valued at $1,384,180.

Your actions make a difference. Don’t make the mistake of missing out.

Here’s My 401k Contributions since 2014:

Year	Direct Contributions	Matching Contributions	Total Combined Contributions	Annual Gains/Losses	FY Portfolio Rate of Return (+)/(-)
2014	$3,142	$2,750	$5,892	+$158.92	+19.38%
2015	$6,359	$3,325	$ 9,684	-$34.90	+1.54%
2016	$13,362	$3,991	$17,353	+$1,666	+3.89%
2017	$17,998	$4,724	$22,722	$7,732	-10.15%
2018	$18,500	$4,993	$ 23,493	-$9,840	-10.22%
2019	$19,000	$5,272	$24,572	+$15,666	+20.11%
2020	$19,481	$5,483	$24,964	+$27,013	+16.23%
2021	$19,500	$5,681	$25,181	+$32,786	+36.53%
2022	$20,450	$6,075	$26,525	-$16,413	-9.49%
2023	$22,438	$6,315	$28,753	+$55,885	+41.04%
2024	$22,972	$6,674	$29,646	+$62,128	+31.85%

Total	$183,202	$55,583	$238,785	+$176,747

* Total Matching Funds and Gains as of 12.31.24, $232,330
**Total 401k Balance as of 12.31.24, $386,010

I Could Bore You With Details…

There isn’t more that I can say about my 401k journey. I can only say that it worked.

My total contributions from January 1, 2014, to December 31, 2024, was $183,202. Mind you this was my first real employment opportunity, so my balance on day one was $0. For the last 11 years, the employer matching contributions (5%) and capital gains are $232,330. This is beyond exceptional. I’ve saved money on taxes ($36,640) and lowered my Adjusted Gross Income which lowered my student loan payments.

By the end of 2024, my 401k balance was $386,010.

My combined gains and matches were 126.82% of my contributions. It’s all there. On this trajectory, my 401k will be $1 million by early retirement. It’s a path that works for me.

Now the ball is back in your court; do you share this with others, do you take action or do you do nothing? This wealth game is a win-win proposition, that’s why I share. People were not around to guide or encourage me, so I didn’t want to repeat their mistakes.