Are you nearing retirement age? Are you a millennial just starting out? Are you somewhere in between? No matter where you’re at on your retirement journey, you’ve likely heard about 401(k) plans and you want to make the most of saving for your retirement. This article will give you 5 tips to master your 401k.
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1. Meet Your Employers Match
Always contribute at least enough to your 401(k) to meet your employers match. Most companies will match 50%, so if you aren’t meeting that amount you are giving up free money. For example, if you contribute $4,200, your employer will contribute $2,100. If you aren’t reaching the point that your employer will match your funds, you are passing up on extra contributions that can help build your savings quicker.
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2. Save Your Bonuses
If you receive a bonus, you have an opportunity to max your 401(k) withholding that month. What this means is, if you get a $5,000 bonus one month, you can use that bonus money for your expenses that month and put your normal salary income toward your 401(k).
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3. Follow the 1% Rule
A good rule to follow is the 1% rule, which advises that you increase your contributions by 1% each year, until you reach your maximum. It will help you grow your savings without hurting your budget.
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4. Have an Emergency Fund
It is strongly advised that you start an emergency fund early. Rather than pull quick cash out of your 401(k) if you have an unexpected accident or suddenly need money for a car repair, you will be able to pull from your emergency fund. By putting away as little as $10-20 a week into a separate account you will accumulate funds and will have extra cash on hand in case of an emergency. Set up a direct deposit to the account, so you will get used to not having that money and you won’t forget to deposit it yourself.
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5. Know Your Company’s Vesting Schedule
While many baby boomers stayed put at a company or two for the majority of their careers, millennials tend to jump jobs every 3-4 years, which could hurt their retirement savings in the long run. Many plans do not fully vest in 3-4 years, so 2 out of 3 millennials end up forfeiting money when they leave a job.
It’s never too early to start planning your retirement fund and with these tips, you will be on the right track to making the most of your 401(k), but never be afraid to seek the assistance of a financial planning expert to help if you need help with managing your money. If you need information about medicare or health/life insurance, please call one of our specialists at 724-929-2300. They will be happy to help you with any questions or to get a free quote tailored to your insurance needs.