You vs. the Top 10%: The One 401(k) Rule Separating Their Balances From Yours

One of the most basic concepts in financial planning is that you should contribute enough to your 401(k) plan to get the maximum employer match. That’s certainly sound advice, as you’re essentially earning “free money.”

But there’s an even better way to build real wealth in your 401(k) plan, and it has nothing to do with picking hot stocks or timing the market. Find out the one rule that could you bring you closer to the top 10%'s retirement strategies.

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The Employer Match Is the Starting Line, Not the Finishing Line

There’s nothing wrong with targeting the employer match percentage as your first financial goal. As most Americans are behind where they want to be in terms of retirement planning, contributing even 5% of your paycheck can feel like a “win.” 

But to really take advantage of the wealth-building opportunities of a 401(k) plan, the employer match percentage isn’t enough. The IRS actually allows contributions of up to $24,500 to a 401(k) account, or $32,500 for those 50 and older. While many workers can’t afford to sock away that much money, that’s the target goal that those in the top 10% try to reach, not simply the employer match.

How Big the Gap Is

Say you earn $90,000 a year and your employer matches 5% of your salary. If you contribute 5% yourself, you’ll end up with $9,000 in your account for the year, with $4,500 coming out of your paycheck and $4,500 coming from your employer. Over the course of a 30-year career, that would amount to a solid $270,000 in employer and employee contributions. 

But if you instead put away 15% of your income, you’d end up doubling your contribution. You’d still receive the same $4,500 from your employer, but you’d be kicking in $13,500 of your own money, for a total of $18,000.

Invested at a 7% average annual return, the first saver would end up with about $915,000 after the 30 years, when factoring in the monthly contribution timing. But the 15% saver would reach a nest egg closer to $1.83 million. 

That’s a huge gap that has little to do with investment knowledge. The bottom line is that steady contributions over time are what allow compounding to work its magic. 

Why Few People Accomplish This

The framing of the employer match as “free money” can actually be counterproductive. For many workers, getting as much “free money” as they can feels like they’re doing enough, and some don’t even know that it makes sense to contribute even more. Employer plans typically start default contribution rates particularly low, often at 3% or 4%, without educating participants about the benefits of nudging their contributions higher.

Vanguard did recently report that the average combined savings rate across nearly 5 million plan participants hit a record 12.1% in 2025. That includes both employee and employer contributions. That’s a good sign, but it’s still far below the amount you can sock away. If you’re earning $80,000, for example, that only amounts to an annual contribution of $9,680, a far cry from the allowable $24,500.

How the Top 10% Gets There

Of course, it’s easier for someone earning a $200,000 salary to save $24,500 than it is for someone making $50,000. But the principles behind boosting your savings over the long run remain the same, regardless of your income.

One good strategy is to bump your contribution rate by a point or two every few months. Small increases like this don’t affect your day-to-day paycheck all that much, and over time you can end up saving a significant percentage of your income. If you automate that increase, you don’t even have to think about doing it.

Another way the top 10% gets there is by redirecting “extra” money directly to their savings. If you get a raise, for example, you can increase your contribution rate to match the pay raise. You can also usually elect to have year-end bonuses go directly to your 401(k) plan instead of your checking account. 

Stopping at the employer match is a good start towards building wealth in your 401(k) account. But to really pump up your nest egg, think of the IRS maximum as your ultimate target, not just the 5% or so your employer may match. That’s the way that the top 10% do it.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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