Given the plans' valuable tax breaks, it makes sense to invest the maximum if you can. There are annual limits. In 2012, if you are under 50 years old, you can contribute a maximum of $17,000. If you're 50 or older, you can make an additional catch-up contribution of as much as $5,500, for a total of up to $22,500.
Those contribution limits change annually to track inflation. The reason: Inflation will gradually reduce the value of a dollar, meaning you will need to contribute more dollars to have the same purchasing power.
Try to contribute at least enough to qualify for your company's maximum matching contribution. Research shows that about one-third of 401(k) participants don't contribute enough to qualify for the maximum matching contribution from their employer. Your Human Resources department can tell you how much you need to contribute in order to get the greatest match. Do it!