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At minimum, contribute enough to capture your full employer match, since anything less leaves free money on the table. A widely cited target is 10-15% of your salary including the match, though the right number depends on your age, income, and other savings. If you can afford it, contributing up to the annual IRS limit accelerates wealth building, and savers 50 and older can add catch-up contributions on top. The exact dollar limits change most years and vary by age band, so check the current figures on the IRS website rather than relying on a fixed amount. Whatever rate you pick, increasing it by even one or two percentage points a year compounds meaningfully over a career.

It is one of the best returns in personal finance, because the match is money you would not otherwise receive. Suppose your employer matches 50% of contributions up to 6% of pay. On a $75,000 salary, contributing 6% ($4,500) earns a $2,250 match, an immediate 50% gain on that money before any market growth. The longer-term effect is larger: if that $2,250 match were added every year and earned a 7% average annual return, it could grow to roughly $212,000 over 30 years. That illustration assumes a steady salary and return, which real life never delivers, but it shows why declining to capture the full match is rarely worthwhile. Match formulas and vesting rules vary, so confirm yours in your plan documents.

It hinges on whether you expect a lower or higher tax rate in retirement than you face today. Traditional (pre-tax) contributions reduce your taxable income now and are taxed when you withdraw, so they favor people who expect a lower bracket later. Roth contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free, which favors people who expect higher future taxes or simply want predictable, untaxed income later. Because nobody knows future tax rates with certainty, many savers split contributions between both for tax diversification. Your employer's matching contributions are generally placed in a pre-tax (traditional) account regardless of which option you choose. This is general information, not personalized tax or financial advice.

Withdrawals before age 59 1/2 generally trigger a 10% early-distribution penalty on top of ordinary income tax on the amount you take out. For example, a $20,000 withdrawal taxed in roughly the 22% bracket would lose about $2,000 to the penalty and around $4,400 to income tax, leaving you with closer to $13,000-$14,000. Beyond the immediate cost, you also forfeit decades of potential compound growth on that money, which is often the larger loss. The IRS recognizes certain exceptions to the penalty, such as the Rule of 55 (leaving your employer in or after the year you turn 55), permanent disability, and substantially equal periodic payments (SEPP). Rules change over time, so verify current details with the IRS or a tax professional before withdrawing.

Vesting determines how much of your employer's matching contributions you actually get to keep if you leave the company. Your own contributions and their earnings are always 100% vested and yours immediately. Employer money, however, may vest on a schedule. With immediate vesting you own the match right away. With graded vesting you earn ownership gradually, for example 20% for each year of service until you are fully vested after five years. With cliff vesting you own none of the match until you hit a set milestone, then become 100% vested all at once. Leaving before you are fully vested means forfeiting the unvested portion, so it is worth knowing your plan's schedule before changing jobs. Check your summary plan description for the exact terms.