Making the Most of Your 401K

1. Making the Most of Your 401K It’s pretty safe to say that pensions aren’t 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, it’s best to start saving as soon as you can for retirement, even if you’re 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. That’s why it’s important for you to know all you can about your company’s 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, you’re basically foregoing free money at retirement. Withdrawals You shouldn’t 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 you’re over the age of 50, it’s 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:

2. -The 1% Rule. It’s 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, don’t do away with your 401K. If you have a withdraw from the retirement account, don’t make a maximum withdrawal until you actual retire officially. If you roll your 401K funds into an IRA, you’ll have to take out the maximum distribution, which can significantly affect your ability to save. -Don’t 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 you’re working. Don’t 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 Source: http://www.money-finance.net/making-the-most-of-your-401k/ http://www.richardbrothersfinancial.com/corporate-retirement/401k-plan-management