Making the Most of Your 401K

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Making the Most of Your 401K
Its pretty safe to say that pensions
arent the primary way to save for
retirement anymore. Most companies have
switched to a 401K plan, which means that
the task of saving for retirement falls on
you as the employee. So, its best to start
saving as soon as you can for retirement, even if
youre just starting out in your career. Gone
are the days when an employee devoted 40
years to a company and retired with a pension
and small gift like a plaque or a watch. Thats
why its important for you to know all
you can about your companys 401K plan.
According to professional financial planners,
here are some tips to help you get the
most out of your 401K. Contributions You
should contribute enough to your 401K
to at least match what your employer
has put into the plan. If you contribute less,
youre basically foregoing free money at
retirement. Withdrawals You shouldnt withdraw
from your 401K before the age of 59 ½ if you can
help it. Early withdrawal comes with penalties
and taxes and cut into your retirement savings.
If youre over the age of 50, its best to use
the catch-up provision, which allows you
to deposit an additional 5,500 into
your retirement plan every year, in addition
to the 17,500 annual maximum amount. There are
also some financial tips that you may not
have considered when it comes to your
retirement that will help you maximize your
401K. Here are a few to consider
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-The 1 Rule. Its a good idea to increase your
contribution to your 401K by 1 every year. You
should do this until you reach the maximum
amount. Try to work this amount into your
savings each year so that you can put
away more money without affecting your budget
too severely. -Save Your Bonus. If you get
a bonus at work, add this to your 401K
instead of spending it right away. Or you,
max out your 401K and take care of your
living expenses with the bonus. -Keep Your
401K If You Delay Retirement. If you
decide to work a few more years after your
original retirement date, dont do away with your
401K. If you have a withdraw from the
retirement account, dont make a maximum
withdrawal until you actual retire
officially. If you roll your 401K funds
into an IRA, youll have to take out the maximum
distribution, which can significantly affect your
ability to save. -Dont Forget About Your
Old 401K. If you had a 401K at a
previous job, remember that you can also
access these funds at retirement. This is
money that you worked hard for, and you
deserve to take advantage of it once you
retire. Most importantly, remember that you
should take care of and monitor your
retirement money while youre working. Dont
simply stash the funds and forget about them.
Make sure that your money performs well,
so that you can truly see the money work for
you during retirement. Articles
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