20 Jun Tips to Maximize Your 401(k)
When you venture into the workforce for the first time, most people aren’t thinking about saving for retirement. But you should be. Most companies have a 401(k) match program. This means that they’ll put in a percentage of what you put into your retirement to help you out.
Company match programs are just one of many ways to help you maximize your 401(k) savings. With these tips, you’ll be ready to retire without worrying about your financial future.
1. Make automatic contributions.
If you automatically put money from your paycheck into your 401(k), you’ll never see it, and you’ll never miss it. This makes saving easier on you because you don’t have to remember to make contributions since it’ll be done automatically. It also helps that you’d never see that money otherwise, so you won’t be thinking about what else you could spend it on.
2. Make bigger contributions.
The longer you work for a company, the more likely it is that you’ll get raises and move up. As you start to make more money, make sure that you’re also saving more. Take more from your paycheck and put it into your 401(k). These bigger contributions mean that you’ll have more money saved in the long run.
3. Argue for a better savings rate.
A lot of companies start new employees off with a 3 percent savings rate on their 401(k). While this seems like a good rate, it may not be enough for you to keep up the lifestyle you’re living once you reach retirement age. Therefore, it’s always a good idea to ask for a higher rate. If your company says no, just ask again a few years down the road.
4. Keep the same 401(k) throughout your career–even if you change jobs.
For many people, changing jobs means cashing out their current 401(k). This should not be the case. It’s important to keep the same 401(k) even when changing jobs. When you cash it out, you’re losing money, and you might not have enough when you actually need it. So keep your 401(k) in tact, and simply transfer it over to your new company. The longer that money stays where it is, the more it’ll grow.
5. Save your bonus.
If you get a bonus any given year, this means great things for your 401(k). Instead of blowing it, keep your bonus and max out your 401(k) savings. You’ll end up saving a lot more that month, which will help tremendously when you’re ready for retirement.
6. Be frugal when you retire.
Once you’ve retired, you’ll have all of your 401(k) savings. You know the phrase. “Don’t spend it all in one place.” That couldn’t be more important when it comes to your 401(k). You’re going to be using this money to survive without a job, so you need to make it last. Don’t take out too much or withdraw too fast.
7. Save for an emergency fund.
You can never save too much money for retirement. It’s also going to seem like anything you have saved will never be enough, but an emergency fund can help. Many times, people who need extra money for emergency expenses will withdraw early from their 401(k). Make sure you have an emergency fund so that you can leave your retirement savings for what they’re meant for–retirement.
Saving for retirement doesn’t have to be difficult, especially if you have a 401(k). As long as you are consistently putting money into your retirement and taking advantage of your employer’s match program, you will be able to maximize your 401(k) and be prepared for retirement in no time.