Your company’s plan advisor can help you make the most of your 401(k).
How well do you know your 401(k) plan? If you’re like many Americans, you know more about your health insurance than this retirement savings device. Although your health is important, so is your retirement income to enjoy your good health later in life.
Retirement investing takes a lot of forms, and an employer-sponsored 401(k) could be more valuable than you realize. If you’re not maximizing your contributions, then you probably have more to learn.
Some employer match contributions double what you tuck away.
Many 401(k) Plans are Practically FREE Money
What’s better than money in the bank? Free money, that’s what. Many, but not all, 401(k) plans come with automatic employer matching. CNN Money says that means for every dollar that you contribute to your plan, your employer matches a portion of it.
So while your 401(k) is growing, it’s growing faster without any additional burden on your paycheck. Even better, your contributions are pre-tax. And if you change jobs and your new job has its own plan, you can take your money with you. If not, you can leave it there to keep growing until you retire.
Your plan administrator isn’t an intimidating roadblock, but a helper who can clarify everything that you want to know.
Most Employers Don’t Make it Easy
With all of the good things about a 401(k), one of the worst is how difficult they can be to understand. The fundamentals are just that – basics that guide the way that every plan works. But each employer-sponsored plan has differences, and NBC News says you need to know what they are.
Some employees fail to maximize their contributions, which sells their retirement investing short. But what’s more, some people opt out entirely. Catherine Golladay, Schwab VP of Participant Services, tells NBC News that with better and clearer education about their 401(k), people are more likely to contribute more, as plan confusion can lead to shutting down.
Most Employees Aren’t Getting the Most Out of Their 401(k)
Most Americans are increasingly aware of the fact that longer lifespans mean a bigger retirement income need. It’s no longer a matter of choosing the best time to take Social Security, but more a matter of actively planning for and personally funding retirement income.
But there’s a breakdown between knowing that retirement is coming and making a concerted effort to do something about it. 401(k) contributions are nearly the easiest way to plan for retirement. And because they’re pre-tax dollars, they don’t pinch as much. With a clear plan and features such as automatic contribution increases, maximizing this savings vehicle would be more convenient, and perhaps better utilized.
It’s a shame to think that such a handy and viable retirement investing tool could go ignored or at least underutilized by so many Americans. It’s even worse if employer matching is part of the deal. That’s throwing free money out the window.
But with better 401(k) plan education methods in place, many experts agree that participation could improve. With higher participation, more people will have yet another means of self support once retirement finally rolls around.
NewRetirement is all about education. Our tools and services exist to make your life simpler and your retirement richer. Start now with our free retirement calculator. You’ll see in black and white how your 401(k) affects your retirement bottom line, and how it could improve if you max out your contributions.
