Despite today's gains, lots of us are still nervous about investing our hard earned money in these rocky markets. But many experts advise people who are saving for a far-off retirement to get gutsy and get in the game. Our retirement guru Michael Kitces explains how to figure out how much you should invest in your 401k...

FiLife User Question: What's the highest percentage you should have taken out of your check for your 401k?

-alpage21

FiLife Guru Response: On a dollar basis, the maximum contribution to a 401(k) plan is $15,500 for 2008 (increasing to $16,500 for 2009). These limits are increased to $20,500 for 2008 (increasing to $22,000 for 2009) for those who are over age 50 and eligible for catch-up contributions.

As long as your percentage contribution based on your salary doesn't exceed these limits, you can generally contribute any percentage of your salary that you want. That being said, a few typical rules of thumb include:

1) Make sure you contribute enough of a percentage to fully take advantage of any employer match.

2) Save more than that if you can afford to do so to build your retirement savings. Most planners use a rough rule of thumb in the range of 10% to 20% of your income if you can manage it, depending on your income and your future goals.

In practice, the percentage will depend on how much you want to save for retirement versus other goals, what kind of retirement lifestyle you hope for someday, how early you want to retire, etc. And of course, you will be constrained by what you can afford based on your other spending needs. But hopefully this provides a helpful starting point!

-- FiLife Guru Michael Kitces

Have a question? Ask it here.