Tips To Maximize Your 401K
It is never too early to start thinking about and planning for your retirement. Even if you are a fresh new worker just out of college, you want to get your head straight about retirement planning. There is no shame is cutting out the beer drinking and new restaurants as a young person, so you can start to sock away real money. It is all about finding the resolve and then following these tips to maximize your 401K account.
You need to educate as much as possible about how a 401K works and investing in general. You can really move yourself up in the world if you learn about investing sooner rather than later. When all your college buddies and early career coworkers are heading out to beer blasts and fun happy hours, you are better off reading investment websites and socking away your drinking money.
Meet The Match
There is nothing better than getting a job with a company that will match funds to your 401K contribution. It is essentially free money. It is financial malpractice not to take advantage of this benefit if the company offers it. When you begin work, find out what percentage of your salary that your company will allow you to contribute that it will match and start with that percentage right away. That is where you can start growing your nest egg with dollars that are not even subject to your wallet or taxes.
Avoid Early Withdrawals
The penalties for early withdrawal are punitive enough that you should avoid all that business at all costs. You can’t take out any money from your 401K before you hit 59 and a half. If you do take out, that means your money is subject to all sorts of taxes and penalties that will harm your nest egg and do damage that you will feel in your 60s and 70s.
Try the 1% Strategy
When you start to save money into your 401K, make a place to increase your contribution by 1% per year in order to keep up. That will allow you to save as much money as possible for retirement without changing your budget or lifestyle too much. It is a smart and sustainable way to save.
Older Workers Can “Catch Up”
Once you are in your 50s, you can begin to make up for lost time. You have the option to put an additional $5,500 into your 401K account each year. That is on top of the maximum contributions you can make to your account. That maximum is up around $18,000 per year, so that extra 5 grand is a nice bump.
Always Roll Over Older 401Ks
Did you have a job in your early 20s and you forgot about your old 401K? It is probably not too late to roll it over. There is no shame is taking that money and moving it into your new 401K. That will just increase your nest egg which is poised to make a lot of return over the years.