Jean Chatzky sends sharp message on 401(k)s, Roth IRAs | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

With growing concerns about market fluctuations and the potential for an economic downturn, many American workers are focused on managing the financial pressures of everyday life — covering housing costs, keeping up with rising grocery prices, fuel expenses, and other necessities.

Even as they navigate these immediate financial demands, they continue planning for the future, actively contributing to 401(k) plans and Individual Retirement Accounts (IRAs) to build a secure retirement and maintain financial resilience in an unpredictable economy.

Jean Chatzky, a well-known author and former financial editor for NBC’s Today Show, offers insightful perspectives on 401(k) plans and IRAs — including one tactic regarding an intriguing strategy for handling IRAs that many will have an interest in exploring.

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Overall, U.S. employees acknowledge the value of retirement savings tools such as 401(k) plans and IRAs, even during periods of market uncertainty.

Enrolling in an employer-sponsored 401(k) plan remains one of the most effective ways to save for retirement, particularly when employers provide matching contributions.

With automatic deductions taken directly from paychecks, this system ensures consistent savings without requiring extra effort, making it both practical and seamless.

The contribution limit for 401(k) plans has increased to $23,500 in 2025, compared to $23,000 in 2024. Employees aged 60 to 63 can now make larger catch-up contributions of up to $11,250, while those aged 50 to 59 can contribute up to $7,500 in catch-up funds.

IRAs offer additional investment options that may not be accessible through a 401(k), making them an appealing choice for certain savers.

However, IRAs require a more proactive approach, as individuals must set up the account and arrange automatic contributions independently. This added level of responsibility can lead some to overlook their advantages.

The contribution cap for IRAs remains at $7,000 in 2025, with an additional $1,000 available for those aged 50 and above.

A retired couple is seen holding hands and walking on a beach. Former NBC “Today Show” financial editor Jean Chatzky has some smart advice for Americans saving for retirement in 401(k) plans and IRAs.

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Jean Chatzky reveals strong strategies for 401(k)s and IRAs

Chatzky advises beginning 401(k) contributors to start small but consistently increase contributions. She suggests beginning with 3% of one’s pay, then raising it by 2% annually.

For most people, an eventual goal of contributing 10% of one’s income to a 401(k) is sufficient, Chatzky recommends. For those beginning to establish 401(k) contributions later in their careers, 15% is an appropriate figure.

The automatic deduction featured by 401(k) plans and the opportunity to take advantage of employer matching are strategies Chatzky endorses.

In fact, Chatzky suggests the automatic deduction concept as an ideal for which to strive in other areas of one’s financial savings approach.

More on retirement:

“The reason 401(k) plans work is because you set them up and then the money gets zapped from your paycheck before you can see it or touch it or spend it,” Chatzky wrote. “It disrupts human impulsivity.”

Chatzky emphasizes the importance of extending automation beyond retirement savings. If one’s workplace offers a health savings account, one can arrange payroll deductions to streamline contributions.

A person can ensure consistent funding for 529 plans and other investments by scheduling automatic transfers directly from their checking account.

“If you’re not someone who will regularly rebalance your investments, put your money in a target date or balanced fund that will do the work for you,” Chatzky wrote. “Auto-paying select bills is a big help, too.”

Jean Chatzky explains converting traditional IRAs to Roth IRAs

A traditional IRA allows tax-deductible contributions, but withdrawals in retirement are taxed. A Roth IRA has after-tax contributions, but withdrawals are tax-free.

Many high earners aim to minimize taxes in retirement, often considering converting a traditional IRA to a Roth IRA if they expect lower tax rates later.

Chatzky addresses this strategy, known as a backdoor Roth IRA. She cautions that converting assets requires paying taxes upfront, which can be costly.

Using IRA funds to cover taxes is discouraged, as it could significantly reduce savings.

This approach is only advisable for those with sufficient funds outside their IRA to handle the tax burden, Chatzky stresses.