Making the Most of Your 401k

Your 401k can be a valuable tool to help you prepare for retirement. If used correctly, it can help you build wealth over a long period of time. If neglected, it won't do you much good. It is provided as a benefit to you by your employer and gives you an advantage in saving for retirement. Here are a few ways that you can make the most of your 401k and save enough for retirement. 

Shoot for 10%

Saving at least 10% of your income for retirement should be your ultimate goal. If you cannot afford that much, work your way up to it. The great thing about a 401k is that it is funded with pre-tax money. Therefore, saving 10% of your paycheck will not actually decrease your paycheck by a full 10%. This makes the hit much more bearable from paycheck to paycheck. If you can save 10% of every paycheck during your working years, you should have a pretty comfortable sum for retirement when you reach that age. If you can eventually save more than that, go for it. However, 10% is what many financial gurus have established as a good goal to shoot for over the years. 

Get the Match

If you have an employer that offers a contribution match, you are definitely ahead of the curve. If you have an employer that matches a certain percentage of your 401k contributions, it's like getting free money. If you throw away free money, you will be wasting a very valuable asset to your retirement. Most of the time, the employer will match half of what you put in up to a certain percentage. For example, if you put in 8% of your paycheck, they will put in 4%. This means that you will accumulate money much faster before you even invest it in anything. Make sure that you try to contribute enough to get the maximum match from your employer. This will make sure that you're not leaving any money on the table. 

Invest Wisely

Usually with a 401k, you can pick which investments you put your money in. Your plan provider will provide several different fund options for you to go with. Some of them will be considered high risk/high return, while others are low risk/steady return. While you might be tempted to go with the high risk/high return investments, you should probably stay away from them, unless you are very knowledgeable about stocks. If you enjoy those types of investments, you should play the stock market or some other type of investment. 

Try to achieve a nice balance of diversified funds and investments. Your retirement is geared for the long-haul so you don't have to try and hurry to retirement. You want to protect your 401k with solid investments. Don't gamble your retirement away on risky investments.

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