To get the most out of a 401(k), you should be aware of the contribution limit set by the 澳洲幸运5官方开奖结果体彩网:Internal Revenue Service (IRS). For 2024, that limit $23,000 if you're under age 50, and $30,500 if you're age 50 or older, thanks to an up to $7,500 澳洲幸运5官方开奖结果体彩网:catch-up contribution.

You should also understand the advantages of employer matching programs, strategies for allocating your excess income to the account, and the power of 澳洲幸运5官方开奖结果体彩网:compounding. The earlier you add money to your 401(k), the൲ longer that money has the chance to earn interest—and the longer ♈the interest you earn has a chance to earn more interest.

Here, we explore how to max out a 401(k), the advantages of doing so, and what to do wit⛄h any additional money you would like to set 🐓aside for retirement.

1. Increase Contributions Gradually

To 澳洲幸运5官方开奖结果体彩网:maximize 401(ꩲk) contributions each year, aiming to reach the limit is helpful. However, many people may find this is not possible, given a high 澳洲幸运5官方开奖结果体彩网:student debt burden, increased costs of care for children and aging relatives, and widespread 澳洲幸运5官方开奖结果体彩网:inflation, among other factors.

If you find yourself in this position, consider beginning with a regular contribution that feels manageable with your current budget, and aim to increase that contrib༺ution gradually over time.

Experts suggest that increasing retirement contributions by 1% of your annual salary each year can yield tens of thousands of dollars more in a retirement account by the time you retire.

Yo𓂃u might also consider automatically upping your 401(k) contributions if you get a raise or a bonus.

2. Check the Default Rate

When you enro🐻ll in a 401(k) shortly after you begin work, it can be easy to miss out on importa꧟nt details.

For example, some 401(k)s will automatically set aside a percentage of your pay for retirement: the default rate. This is helpful, but typ🗹ically that percentage is not the maximum you can contribute. Be sure to read any documents pertaining to your 401(k) and enrollment carefully to ensure you take full advantage.

3. Get the Employer Match

Another bit of fine print to read carefully as you sign up for a 401(k) relates to whether (and how much) your employer will contribute. Many employers offer to 澳洲幸运5官方开奖结果体彩网:match your contributions up to a certain percentage of your salary. To g♕et the full match, you must also contribute that percentage.

Investors should take advantage of this opportunity whenever possible, as it represents free money to set aside toward retirement and does not impact the maximum contribution you can make.

Be mindful, however, that employers may have a 澳洲幸运5官方开奖结果体彩网:vesting requirement for any contributions made on your behalf to a retirement plan. You may have to remain employed at the company u♚ntil vested (typically a few years) to be able to keep the employer match funds.

4. Beware of Early Withdrawal Penalties

Almost a quarter of 澳洲幸运5官方开奖结果体彩网:millennials say they’ve changed jobs in the past year, while 83% of Gen Z consider themselves job-hoppers.

With every job change comes some important decisions about 澳洲幸运5官方开奖结果体彩网:preexisting retirement savings. Don’t be tempted to spend cash from an old retirement account unless it’s necesꦉsary, as you’ll pay a 10% early withdrawal penalty tax and fail to benefit from the power of compounding on funds held in a retirement account for many additional years.

Instead, 澳洲幸运5官方开奖结果体彩网:roll over your retirement savings to your new employer’s plan to benefit from having one account to manage. You can also roll over the assets to an 澳洲幸运5官方开奖结果体彩网:individual ret🍬irement account (IRA) to access new investment options.

5. Become an Informed Investor

With a defined contribution plan like a 401(k), you need to take an active role to strategically build up savings. 澳洲幸运5官方开奖结果体彩网:Defined benefit plans (pensions), on the other hand, are managed by s♈omeone else—and they're far less comm😼on.

“401(k) plans differ greatly from the pension plans that Millennials’ parents often utilized in previous decades," says Chad Kennedy, a financial planner at Lighthouse Financial. "401(k) plans require the employee to direct the investments within the retirement account, while a pension plan’s investments are managed by the employer or a third-party money manager.”

Kennedy adds that, though daunting, the🍌 responsibility of managing your own 401(k) provides a “great opportunity to optimize theღ retirement account to suit your own financial goals.”

Doing so requires that you become well-versed in the different ways of structuring your 401(k) investments. For example, 401(k)s allow investors to put all of their investments in a 澳洲幸运5官方开奖结果体彩网:target date or growth fund for a passive investing experience, or to 澳洲幸运5官方开奖结果体彩网:actively manage a portfolio, including a range of different 🎀securities.

A cardinal rule of retirement planning is to adopt a more 澳洲幸运5官方开奖结果体彩网:conservative investment approach the closer you get to retirement. The reason why is that if your investments are tied to volatile assets like stocks and there is a downturn right before you retire, you stand to lose a large chunk of what you’ve spent decades saving. Younger investors, on the other hand, will typically opt for a hi🌃gher-risk, higher-reward asset allocation weighted more heavily toward stocks. As time goes on and r🔜etirement gets closer, this often shifts toward a more bond-heavy approach.

However, note that what you can include in your 401(k) 澳洲幸运5官方开奖结果体彩网:portfolio may be limited by the provider. It pays to research what that🐎 provᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚider offers before making investment decisions.

What to Do After Maxing Out Your 401(k)

If you've maximized your contributions to your 401(k) and taken full advantage of any employer match available to you, here are some of the options you might consider for further retirement savings:

• Individual Retirement Accounts (IRAs): IRAs are retirement accounts open to individuals through a brokerage or a fund manager. They exist in both traditional and Roth formats to maximize tax advantages. The 2024 contribution limit for an IRA is $7,000 for those under 50, and $8,000 for those age 50 or older.
• Health Savings Accounts (HSAs): HSAs allow you to set aside pre-tax income to pay for certain medical expenses, potentially allowing you to reduce the total out-of-pocket costs. Eligibility for an HSA depends on your healthcare plan.
• Annuities: 澳洲幸运5官方开奖结果体彩网:Annuities are contracts between investors and insurance companies. Through an annuity, the investor supplies a purchase payment (either all at once or spread out over multiple installments) and the insurer agrees to make periodic payments back to the investor immediately or in the future.
• Taxable Investments: Taxable 澳洲幸运5官方开奖结果体彩网:brokerage accounts do not receive the same tax advantages as 401(k)s or IRAs. However, depending on your returns over time, these accounts may still provide a strong alternative option.

Evaluating these options will likely include assessing how much additional income you’re comfortable putting toward retirement 澳洲幸运5官方开奖结果体彩网:after maxing out your 401(k).

The Bottom Line

Maxing out your 401(k) can yield significant long-term benefits, including greater funds available in retirement, taking advantage of compound interest, and more. You can put any additional funds you would like to set toward retirement into IRAs, HSAs, annuities, or taxable investment accounts. And if you're not in a position to max out your 401(k), don't worry. Do what you can, bit by bit.