Having the opportunity to contribute to a 401(k) is one of the best ways to save for your retirement. Let’s take it one step further and discuss a few helpful tips to help boost your savings before you reach retirement.
- Start early, start now
Time is your biggest asset. The younger you start, the more time you will have to your advantage. If you haven’t started, begin contributing to your 401(k) now. The power of compounding will allow your investments to grow over time. You will miss out on investment opportunities the longer you delay.
- Get the full employer match
Take advantage of your employer match, if one is offered at your company. The amount your employer contributes on your behalf is added to the amount you contribute to your 401(k); make sure you contribute enough to receive the full match. Combining the two contributions will help give your account an extra savings boost.
- Percentage vs fixed dollar amount
If you have a choice between the two methods, select to contribute a percentage of your salary to your 401(k). By contributing a certain percentage, you will automatically capture any raises and bonuses you earn. Another helpful tip is to increase your contribution by 1% per year or after you receive a raise until you are contributing the maximum limit. Keep in mind the maximum limit to contribute to a 401(k) for 2017 is $18,000 (plus $6,000 catch up for age 50 and older).
- Look at your investments
You want to make sure your risk is in line with your objectives, age, and risk tolerance. The best option is to talk to a financial advisor who can help assist you on selecting the appropriate investments based on your goals.
Contributing to 401(k) will play a vital role when preparing for retirement. It is important to take this opportunity now to increase your savings as much as you can while you are still working.
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