Live well during your retirement!
Most people want to live well during retirement and many employed persons choose to save towards retirement through an employer-sponsored 401k.
At the very least, most persons want to maintain the standard of living that they have become accustomed to. They want to ensure that they will have enough to meet their daily expenses without depending on their grown children or relatives for financial support. Most employers will offer the opportunity for you to establish a 401k plan. However, it is up to you to maximize the benefits of this special type of savings account.
Make the Maximum Monthly Contribution
One of the best ways to maximize your 401k benefits is to make the biggest monthly contributions that you can afford to make subject to the maximum allowable contribution. It goes without saying that the more you are able to save now, the more money will be available to you at retirement. In addition, the more you can save now, the more interest you will be able to earn when your contributions are invested on your behalf. This means that you will have more funds available to fund your retirement.
Another benefit of making the maximum monthly contribution that you can afford to make, is that it reduces your income tax obligation. Remember that your 401k contributions are deducted prior to taxation, which means that you will end up paying less tax each month depending on the size of the 401k deductions. Which ultimately means that more is left to invest towards your retirement fund.
Finally, you should bear in mind that your employer will match your contributions if you contribute 3% or more of your annual salary towards your 401k. So again, the more you contribute towards your 401k, the more your employer contributes which means more funds for you at retirement. If you contribute less than the maximum amount, you are depriving yourself of money later on. It is better to sacrifice now in order to reap the benefits later. Remember also that some employers will only match your contributions up to a certain percentage of your salary.
Put Bonuses and Gifts Towards Your 401k
It is a good idea to put any bonuses or lump sum gifts that you may receive towards your 401k. The aim is to maximize your retirement savings so the more you can put away, the greater returns you can make and the larger and faster your retirement fund will grow. While it may be easy to spend your bonuses on consumer purchases, it will be well worth it to instead put that money towards building a more financially secure retirement.
Prioritize Your 401k Payments
In periods of financial hardship, it may be tempting to reduce your monthly 401k contributions. This is not a good idea and you will be better off cutting expenses in other areas. In other words, sacrifice today so that you can live better tomorrow.
Free Financial Counseling
If you need any further information or help budgeting, feel free to reach out to Sunbelts Free Financial Counselors via live chat or by phone at 601-649-7181 option 6!
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