Retirement Planning: 5 Big Benefits of Increasing Your 401(k) Contributions
For most working Americans, 401(k) plans will be the largest contributor to their retirement income besides Social Security benefits. Making sure you have a healthy 401(k) is critical to effective retirement planning, so if you need additional motivation to save, here are five big benefits that contributing to a 401(k) can provide you:
Free money (the employer match). Most employers provide matching contributions depending on what you yourself are contributing to your company 401(k). This is free money you should not leave on the table. Be sure you are contributing enough to get the full employer match every year.
Tax breaks. The money you contribute to a 401(k) is taken out before taxes, so making a large contribution can put you in a lower, more favorable tax bracket. Even if this is not the case, you put off paying taxes on this money and enjoy the growth your pre-tax investments contribute to your retirement.
Risk management. Since your contributions are made every pay period, you even out investing risks over time instead of investing one big lump sum in the market.
Automatic savings. Most people have problems with saving - in fact, a recent FINRA study showed that 59% of us spend an entire paycheck or more each month. Since contributions to a 401(k) are automatic, you are essentially "forced" into a savings plan.
Catch up. According to the Federal Reserve, nearly 40% of Americans have nothing saved for retirement. If you are over the age of 50, you are allowed to contribute even more to your 401(k) - an additional $5,000 each year - that will allow you to catch up on your retirement saving.
The Flanigan Law Group provides Southern California residents with personal attention for estate planning, administration and litigation legal services. When disputes between families, arise, we are very successful in resolving legal estate issues quickly and efficiently while preserving financial and emotional resources. Contact the Flanigan Law Group at 949-450-0041.