How’s your retirement plan going? Whether you’re just getting started, in need of a total overhaul, or just looking to fine-tune things remember that you’re in the driver’s seat and the road to retirement is hardly ever a straight line.
A 401(k) retirement account is one of the best retirement vehicles you can own because it allows you to contribute money on a pre-tax basis and sometimes even get free money from your employer in the form of a match, and it’s relatively out of sight, so you tend to forget about it while your money grows.
Most importantly, a 401(k) account gives you a cushion for future detours and roadblocks, healthcare bills or in retirement. Your retirement represents your efforts – right now you’re working hard to earn the right to retire, here’s how to make a 401(k) account work for you. If you’re eligible for an employer match, maximize it.
It’s free money.
- Matching employer contributions is one of the fastest and most effortless ways to boost your 401(k) balance.
- When you have a dollar-for-dollar match, you immediately double the money you put in.
Set up annual increases.
- Commit now to increase your 401(k) contributions annually and make it more likely to progress toward your goals.
- For example, you could increase your 401(k) contribution by 1% every year during open enrollment or each time you get a raise.
- Even better, many companies allow you to set up automatic increases so you don’t have to remember or act on it yourself.
Coordinate with other goals to stay on track.
While retirement is important it’s not your only goal. If increasing your retirement savings makes it so that you can’t pay your rent, build an emergency fund, or reduce your debt, you may want to focus on these goals first.
Tip: Emergency savings is crucial to your retirement success because it allows you to weather unexpected events without withdrawing from your retirement account or reducing your contributions. Likewise, eliminating high-interest debt can help you switch from paying interest to earning it!
Aim for 15%.
- Saving 15% of your income each year (including any employer contributions) is an appropriate savings goal and is a great target to aim for.
- Once you’ve saved 15%, take a step back and celebrate that accomplishment! Find out how close that will get you to your retirement goals.
Build a plan.
- Create a plan and personalize your efforts – everyone has to start somewhere and now seems like a good time, how about it?
- Small steps can make a big difference. Walk before you can run so if all you can do now is contribute 1%, then that’s where you start.
- It’s never too late. Even if you’re approaching retirement, something is better than nothing, and you can still build a better retirement.
- If you’re 50 and older, you can add an extra $6,500 per year in catch-up contributions, bringing your total 401(k) contributions to $26,000.
- Work with a Brightside Financial Assistant on how to get started today.
Brightside Client Story
Bill came to Brightside to help organize his finances and determine how much money he needed to save for retirement. He was in the process of splitting assets from a previous relationship and needed help understanding pension plans from previous employers. In addition, he was not maximizing his retirement plans, either under- or over-contributing, and had almost a year’s worth of savings in the bank with a very low interest rate. He reached out to his Brightside Financial Advisor for guidance.
How Brightside Helped
• Bill and his FA worked together to gain a better understanding of his pension plans from previous employers and they discussed the importance of asset allocations within his 401(k).
• Bill increased his retirement contribution from 7% to 10%, maxing out the employer match on his 401(k).
• Bill’s FA helped him make corrections for over-contributing to his Roth plan before filing his taxes to avoid a penalty and explained pros and cons of managed investment accounts and fees to watch out for.
• They discussed keeping six months worth of savings in cash and investing the rest for longer-term
“My financial assistant is knowledgeable, empathetic, and encouraging.” — Bill
90% of American workers with 401(k) plans said that payroll deduction helps them save.
Brightside members save $1,200 per year on average. Really! Talk to your Financial Assistant today to see what Brightside can do for you.
Just call 855-940-1507 to get started.