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As New Year’s rolls around, many people resolve to increase their savings. This is a great goal, and entirely possible using a common investment vehicle: the 401k. Even if you think you’ve done all you can to put money away, there are some easy ways you can maximize that amount you are putting into your nest for retirement.
One of the easiest ways to get more 401k money is to get others to give it to you. If your employer has a matching program, that amounts to free money. Have a look at your contributions to make sure you’re putting in enough to get your company to kick in a little, too. In fact, ask your employer these 5 questions about your 401k to be sure you’re getting the most bang for your buck.
It might surprise you to learn that a lot of companies put a low default on employee 401k contributions. It may be as little as 3 percent, which can fall short of helping you meet your financial goals. See if you can increase that percentage, especially if you meet the threshold for matching funds. Even if means you have to budget a little more tightly in 2019 and beyond, it can mean a significant return on investment.
There are tax savings for 401k contributions, and that’s why there are guidelines about how much you can put into this vehicle every year. Not everyone knows, however, that you can add more money to make up for years you have contributed less than you were allowed.
These are called catch-up contributions and are calculated on top of your yearly maximum. Find out how much catch-up contribution you can add in 2019 and put in the effort to put that cash aside. The amount you can add depends on your age, and increases as you get older.
If you think of your 401k savings as a percentage of your income, it should go up whenever you get a raise. Resolve to take this step in 2019. If you are due for an annual review or bonus, increase your 401k contributions accordingly. This way, you can continue with the same standard of living, but still save for a time when you are not in the working world. Above all, it’s a good idea to resist the temptation to spend extra money when you could be getting a return on the funds.
Slow and steady wins the race, especially when it comes to saving for retirement. Even small changes can add up to real money later, so consider making the choice to maximize that 401k vehicle. And if your 401(k) contributions are on track, consider online investing as your next step. Investing in an IRA can be a good complement to a 401(k) and help cover your bases for your retirement. Be sure to research the best online IRAs to help you make a good decision.