For the uninitiated, a 401k is a retirement savings plan that allows you to consistently save until the day you no longer have to work. Money is regularly taken out of your pay in order to support the plan in question, and it takes several years for it to truly build. You might have a 401k being built right now, but how do you know if you're getting the most out of it? To maximize it, here are 4 methods to consider, courtesy of Bob Jain.
Robert Jain, as well as other authorities on finance, will tell you that your raises matter. If you receive an increase in pay at your job, it's the perfect opportunity to increase how much you contribute to your 401k every week or two weeks. The more that you contribute, the earlier that you can retire. While you don't have to dedicate the entirety of your raise to your 401k, increasing the amount saved to any degree pays off.
Next, consult your employer to see if they can match your contribution. Believe it or not, there are many places of work that match the amount that their workers save toward their 401k plans. What this means is that, depending on how much you put into your account, your employer will be able to match it. This is free money, in a sense, and it all but ensures that you get to retire sooner than you previously anticipated.
You should also resist dipping into the money in your 401k plan, as it can have many negative consequences. First, you will be penalized for taking money out, meaning that you'll have to make a payment on top of what you've withdrawn. Second, you will reduce progress made from a retirement saving standpoint. While it's understandable that someone may fall on hard financial times, taking money out of the 401k is an absolute last resort.
To wrap things up, and to help you truly maximize your 401k, review the plan in question at the end of each year. This will provide you with an opportunity to evaluate the progress you've made up until that point. It may also encourage you to make any financial changes that you see fit. If you feel like more money can be invested without hampering your day-to-day responsibilities, this should be considered. The more thorough your review is, the more you stand to gain from it.
Robert Jain, as well as other authorities on finance, will tell you that your raises matter. If you receive an increase in pay at your job, it's the perfect opportunity to increase how much you contribute to your 401k every week or two weeks. The more that you contribute, the earlier that you can retire. While you don't have to dedicate the entirety of your raise to your 401k, increasing the amount saved to any degree pays off.
Next, consult your employer to see if they can match your contribution. Believe it or not, there are many places of work that match the amount that their workers save toward their 401k plans. What this means is that, depending on how much you put into your account, your employer will be able to match it. This is free money, in a sense, and it all but ensures that you get to retire sooner than you previously anticipated.
You should also resist dipping into the money in your 401k plan, as it can have many negative consequences. First, you will be penalized for taking money out, meaning that you'll have to make a payment on top of what you've withdrawn. Second, you will reduce progress made from a retirement saving standpoint. While it's understandable that someone may fall on hard financial times, taking money out of the 401k is an absolute last resort.
To wrap things up, and to help you truly maximize your 401k, review the plan in question at the end of each year. This will provide you with an opportunity to evaluate the progress you've made up until that point. It may also encourage you to make any financial changes that you see fit. If you feel like more money can be invested without hampering your day-to-day responsibilities, this should be considered. The more thorough your review is, the more you stand to gain from it.
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