Thursday, September 28, 2017

How to Finish a Career With a Full 401k


A 401k provides you with incredible tax benefits that can help you to more easily reach your retirement goals several years or decades from now. However, many people who have a 401k do not feel as though they are properly using it in the most effective way possible. If you are included in this group of people, you may be wondering what steps you need to take to retire with a full 401k account balance. These tips can help you to take advantage of the full potential of your retirement account in the years to come.

Improve Your Budgeting Efforts
An important first step to take is to improve your budgeting efforts. Some tools like Virtual bookkeeping can help you to manage and track your funds with ease. You could also create your own budget on an Excel spreadsheet. Think about budgeting for a year rather than only for a month. Long-term budgeting can help you to better account for non-recurring expenses, annual expenses and others. While you are preparing a budget, look for areas that you can cut back on. When you reduce spending, you have more money available to save for retirement. For example, you could shop for lower insurance rates, refinance your auto loan or switch from standard cable service to Internet TV programming.

Maximize Contributions to Your Retirement Account
Your retirement account contributions are likely automated. For example, you may have instructed your employer to take one percent of your income out of each paycheck you receive. If you are self-employed, you may have set up an automated funds transfer into your retirement account to avoid overlooking this important transfer. While automating your contributions is a thoughtful idea that can help you to streamline this process, you should also consider increasing your contributions up to the maximum amount possible. If this seems burdensome to your budget, think about increasing contributions in very small increments every few weeks until you reach the desired contribution amount. This will make your larger contributions less noticeable and easier for you to manage.

Take Advantage of Employer-Matching Contributions
When your goal is to retire with the largest retirement account balance possible, focusing your attention on employer-matching contributions is important. If your employer offers a contribution up to two or three percent of your income, you need to take full advantage of this option. An employer-matching contribution is essentially free money that your employer is giving to you, and the financial benefit can add up to tens of thousands of dollars or more over the years. If your employer does not offer this benefit, think about shopping around for a new job that does offer this perk. This is because an employer-matching contribution is a significant financial advantage that can play a major role in your financing situation during retirement.

Diversify Your Portfolio
To achieve your retirement goal, saving money regularly is important. However, it is equally as important to choose sound investment options. Take time to carefully research the investments that you are buying through your retirement account today. Then, make plans to review your account’s performance approximately six months from now. Every six months, you can review the performance of your investments as well as the overall risk of your portfolio. Your goals and needs may change over time, and reviewing your portfolio can help to ensure that it is properly diversified.

Opening a 401k account is a great step to take if you want to enjoy a more secure retirement. However, you also need to maximize your contributions as well as automate them when possible. You also should actively diversify and review your portfolio so that you maximize the return on your invested funds. While this can sound like a lot of work, remember that you only need to review the account once every few months after you set up automatic deposits and investment purchases. You will be surprised how quickly your 401 k retirement account balance grows when you follow these tips.

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