Being able to spend retirement living comfortably without worrying about an income stream is important for many consumers. Retirement accounts are available specifically to help consumers save for retirement, and a 401(k) is a popular type of retirement account that many consumers opt to use. Being able to successfully manage your 401(k) will help you build the wealth that you need to retire in comfort.
Here are three tips that you can use to help maximize the wealth-building potential of your 401(k) account in the future.
1. Don't let your contributions remain stagnant.
One of the mistakes that consumers can make when it comes to managing a 401(k) is failing to recognize the importance of increasing their contributions each year. By opting to add more money to your retirement account, you will be able to maximize its growth potential over time.
Experts suggest that you consider increasing your contribution amount by 2% at the beginning of each year. This will ensure that your account will grow significantly, allowing you to retire with financial security when the time comes.
2. Always invest extra money into your 401(k).
Many consumers work for companies that offer substantial performance bonuses. Rather than saving a percentage of any bonus that you receive, you should invest extra money into your retirement account.
During the months when you are awarded a bonus, invest your entire salary into your 401(k) and live off your bonus instead. This will help significantly grow the amount of money that you have in your 401(k) account without compromising your ability to live comfortably in the present.
3. Plan for taxes.
It's important to recognize that the money in a 401(k) account is subject to taxation when you withdraw the funds during retirement. You should carefully evaluate your projected tax bracket at retirement, then use this tax bracket to estimate how much of your 401(k)'s balance will be taken out in taxes.
Knowing your taxation rate will allow you to invest additional funds into your account to meet both your retirement goals and your tax burden.
Planning for the future is critical when it comes to retirement, and being able to successfully manage a 401(k) account can help you prepare for financial stability once you stop working. Maximize your retirement account's wealth-building potential by increasing your contribution amount each year, investing additional money into the account whenever possible, and planning for taxation as you set savings and investment goals. For more tips on successful 401(k) management, talk to a financial planner in your area.
When my card was declined at the grocery store a few months ago, I realized my financial situation had hit rock bottom. Instead of ignoring the problem, I decided to meet with a financial counselor to see what I could do to make things better. I talked with him about how to handle unplanned expenses and how to budget for my day-to-day life. It was incredible to learn more about money, and now I can proudly say I am living within my means. I decided to make this blog for anyone that struggles with financial planning so that you can turn things around.