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.
Another way to get the most from your 401k is by consulting your employer to see if they can match your contribution. For example, if you invest about 5% of your biweekly pay into your retirement savings account, your employer may match it. What this means is that you get an additional bonus that you can use toward your 401k. Even if you're under the impression that your workplace won't allow this, it doesn't hurt to ask.
If you're in a tight financial situation, it might seem like a good idea to simply take money out of your 401k. Depending on who helped you establish this plan to begin with, you may already know that this is a bad idea. For those that don't know, not only will this set back the progress you've made with saving money but you may be penalized with a payment that you must cover. Simply put, taking money out of your 401k early isn't worth it.
Finally, at the end of each year, take the time to review your 401k plan in relation to your long-term goals. See how much money you've saved over the last several months. Do you feel like there's room to invest more money? Do you feel like you have to pull back on the amount saved from week to week? These are just a few questions to bring up during the review process. The time spent on this will make a considerable difference for your 401k.
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.
Another way to get the most from your 401k is by consulting your employer to see if they can match your contribution. For example, if you invest about 5% of your biweekly pay into your retirement savings account, your employer may match it. What this means is that you get an additional bonus that you can use toward your 401k. Even if you're under the impression that your workplace won't allow this, it doesn't hurt to ask.
If you're in a tight financial situation, it might seem like a good idea to simply take money out of your 401k. Depending on who helped you establish this plan to begin with, you may already know that this is a bad idea. For those that don't know, not only will this set back the progress you've made with saving money but you may be penalized with a payment that you must cover. Simply put, taking money out of your 401k early isn't worth it.
Finally, at the end of each year, take the time to review your 401k plan in relation to your long-term goals. See how much money you've saved over the last several months. Do you feel like there's room to invest more money? Do you feel like you have to pull back on the amount saved from week to week? These are just a few questions to bring up during the review process. The time spent on this will make a considerable difference for your 401k.
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Get in touch with Bob Jain if you'd care for additional information about what you have just read.
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