To Auto-Increase or Not to Auto-Increase Your 401(k) Contribution Rate

Automatically increasing your 401(k) contribution rate can be a great way to boost your savings. But could your next dollar work better for you elsewhere?

A clear jar with money in it bears the label 401k.
(Image credit: Getty Images)

During the past 30 years, there has been an important revolution in the administration of 401(k) plans. Often referred to as auto-increase or auto-escalation, here’s how it works: If you are automatically enrolled in a plan and don’t opt out of the auto-increase feature, then your deferral rate will increase over time, up to the plan maximum. The frequency, rate of increase and plan maximum can vary, but a common approach is an annual increase of 1 percentage point on the anniversary of your initial enrollment, up to a 10% maximum.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Alan Vorchheimer is a Certified Employee Benefits Specialist (CEBS) and principal in the Wealth Practice at Buck, an integrated HR and benefits consulting, technology and administration services firm.  Alan works with leading corporate, public sector and multi-employer clients to support the management of defined contribution and defined benefit plans.