Save early and often
How much you put away matters more than how your investments fare. Here's how to know if you're on track.
By Penelope Wang, Money Magazine senior writer

(MONEY Magazine) -- The most important part of 401(k) investing is also the easiest to master: It's the act of saving regularly.

You may think 401(k) success is all about selecting funds with hot performance. In reality, how much you save matters far more than what your funds return.

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Suppose you started work in 1990 with a $40,000 salary. You saved just 2% of your pay but were such a brilliant investor that you put your 401(k) into top-returning funds every year. You would have finished 2005 with nearly $50,000 in your 401(k).

Now suppose you were so clueless about investing that you picked mediocre funds year after year, but you were frugal enough to save a full 6% of your salary. You'd hit 2005 with nearly $120,000. That's right: more than twice as much as the brilliant saver.

A growing number of employers will automatically sign you up for the company's 401(k), as well as regularly increase your contribution rate, making saving literally effortless.

Problem is, these automatic investments often start at just 2% to 3% of your salary. Not enough. If you're in your twenties, suggests Christian Echavarria, founder and senior vice president of Invesmart, a 401(k) advisory firm, figure on putting away at least 6% of your salary, or 10% if your employer doesn't match your savings.

Then increase your contribution by as much as one percentage point a year. In your thirties, you should be saving 12%; in your forties, 14%.

By the time you reach your fifties, you may need to save 15% or more, depending on how much ground you have to make up. It helps that by age 50 you can contribute an extra $5,000 a year on top of the regular 401(k) max (for a total of $20,000 in 2006).

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More resources:

How fast will your savings grow? Tell us how much you have, how long you will save and at what rate, and find out what your nest egg will grow to.

Money 65: Best funds to own Picks in every category can round out any portfolio.

The get-started retirement plan Puzzled about what to do now that you've signed up for your 401(k) plan? Money Magazine's Walter Updegrave has some answers.

The Last 401(k) Guide You'll Ever Need Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.