Increase 401(k) Contributions
Having a 401K can be one of the best investments to help you with your retirement goals. According to an article posted by Forbes in 2018, most Americans will need to contribute at least 12% to 15% of our earnings to our 401K plans each year to be somewhat comfortable in retirement. For some of us that can be a very lofty goal. One of the most beneficial aspects of your 401K plan is that you receive tax breaks for these contributions and your employers can match what you contribute. Pre-tax contributions to your 401K offer and direct tax benefit. Even if your employer isn’t participating in any type of matching plan, it is still essential for you to bolster up your savings.
As of 2020 employees can contribute up to $19,500 to their plans, which is $500 more than the previous year. Here are some ways that you can increase your contributions so that to make the most of you 401K plan.
- Most employers will match your contributions up to a certain percentage. Match the maximum your employer is willing to contribute. We’ve all heard of the phrase “don’t leave money on the table” when it comes to negotiating your salary, but this can be true of your 401K contributions too. If you are lucky enough to have your employer match you dollar for dollar take advantage of it. You’re getting twice the return on your money so you should make the most of it.
- Reallocate the money being taken out of your paycheck. If you are contributing to an HSA, FSA or a medical health plan that you aren’t really using, ask your employer to decrease the percentage of your paycheck used to fund those and increase your 401K contributions. If you are or have been in relatively good health and don’t use those benefits very often, you can repurpose that money into your 401K. This is especially wise if your employer isn’t matching the amounts you put towards those plans.
- Look at your monthly budget holistically and see if there are some bills or expenses that you could cut and use that money to increase your contributions. A little bit can go a long way, especially if your contribution is being matched. A few small sacrifices could really help you meet your retirement goals.
- Take some time to get to know your 401K plan and the portfolios that you are investing in. It’s not enough to just contribute, you have to find the most appropriate asset allocation model that works for your financial portfolio. Most of us aren’t skilled in understanding 401K’s even at a high level, so speaking with us here at SJK Wealth Management can help you make the most of out of your money.
It’s never too early or too late to start saving for your retirement. Our definition of wealth at SJK Wealth Management is when your income exceeds your expenses. We can help set you on the right path to pursue your goals in retirement. Contact us to speak with an advisor today.