Let’s face it. Most people have no idea how exactly a 401k or retirement savings plan works, or how to best optimize it. I’ve met people of all ages, income levels and education levels, and there’s no one predictor for knowing how best to utilize a 401k. So let’s go over some basics to make sure you’re doing enough 401k planning for your future!
Have You Started A 401k?
First of all, have you started a 401k? You have access to one through your employer, and should take advantage if you can.
Start contributing at the highest level your employer will match at. That might be 3% or 6% of your income. Of course, you’ll want to pay off high interest debt first, but it’s important to take those matching contributions as soon as you can to get the most out of your 401k.
Read The Fine Print
When you’re trying to work out how best to use your 401k plan, be sure to read through the fine print. There are often small rules and minutiae that can help you, like maybe they’ll only match up to 3%, unless you have a specific condition and they’ll match additional (i.e. if you throw your annual bonus into the 401k they’ll match that above and beyond the 3%.)
Don’t Over Manage (Or Under Manage)
When it comes to a 401k, just let it ride out for the most part. Micromanaging it can hit you with too many fees to make it worth it. I generally recommend adjusting the 401k twice per year to make sure things are continuing to go smoothly. Any more than that, and fees can start to add up.
Hit Your Targets
Figure out what you need for retirement and your roadmap for getting their. For 401k planning, even though it’s through work, it can be in your best interest to get an outside financial advisor to help you figure out the best way for you to get to retirement with the money you need!