How can employees maximize their 401(k) savings for retirement?
- Carlos Greene
- May 16, 2024
- 2 min read
Maximizing retirement savings through a 401(k) plan is a smart financial move. Here are some tips to help employees make the most of their 401(k):
Contribute as much as possible: Aim to contribute the maximum amount allowed by your plan. As of 2022, the annual contribution limit for 401(k) plans is $20,500 for individuals under 50, and $27,000 for those 50 and older. Contributing the maximum amount allows you to take full advantage of the tax benefits and potential employer matching.
Take advantage of employer matching: If your employer offers a matching contribution, contribute at least enough to receive the full match. Employer matches are essentially free money and can significantly boost your retirement savings.
Consider a Roth 401(k): Some employers offer a Roth 401(k) option, which allows you to contribute after-tax dollars. While you won't get an immediate tax deduction, qualified withdrawals in retirement are tax-free. This can be advantageous if you expect to be in a higher tax bracket in retirement.
Managed Account Services: MAS will allocate your contributions across a diverse mix of investments, such as stocks, bonds, and mutual funds, based on your risk tolerance and retirement goals. MAS will regularly review and rebalance your portfolio to ensure it remains aligned with your objectives.
Take advantage of catch-up contributions: If you're 50 or older, you're eligible to make additional catch-up contributions to your 401(k). As of 2022, individuals over 50 can contribute an extra $6,500 per year. This can help boost your savings in the final years leading up to retirement.
Avoid early withdrawals: While 401(k) plans offer tax advantages, withdrawing funds before age 59 ½ typically results in penalties and taxes. Try to avoid tapping into your retirement savings early unless absolutely necessary.
By following these tips, employees can maximize their retirement savings and work towards a financially secure future.
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