Opting-in to your company’s retirement plan can be one of the most strategic steps you can take in owning your financial future. Compounded interest, match opportunities and continuous contribution could be the key to growing wealth in 2024.
Here are six of the top tactics to consider when participating in your employer-sponsored 401(k) plan.
1. Employer Match Opportunities
An employer match plan involves your employer contributing a certain amount to your retirement plan after a designated period of time. Most commonly, an organization will offer $.50 for every dollar contributed by an individual.
98% of 401(k) plans contribute to workers’ retirement so your employer most-likely offers this option to its staff. It was reported that 62% of workers view 401(k) employer match as the key to reaching retirement goals, so explore these options for increased retirement growth.
2. Tax-Deferred Opportunities
Next, explore the tax benefit associated with investing in a retirement plan. One strategic advantage to investing in an employer-sponsored 401(k) plan is that contributions are tax-deferred. This means the investment earnings can accumulate tax-free until the owner collects the profits.
Also, your overall taxable income will be less due to a portion of it being invested, ultimately saving you more at tax time. Use this advantage to consciously grow financially.
3. Increase Contributions
Beginning to invest in a retirement plan can feel daunting. Committing to a consistent amount to be taken out of your check every pay period can make anyone pause for a minute. Once this becomes part of your routine, it becomes easier to see growth and want to invest even more for you and your family’s future. Consider raising your contributions a few percentage points every year to increase your retirement earnings potential.
4. Try Maximum Allowable Amount
Once you are in the groove of contributing to a employer-sponsored 401(k) plan and your monthly budget is working well for you, it may be time to consider contributing the maximum allowable contribution. The IRS does place a limit on the amount that can be contributed to a 401(k) each year. In 2024, the limit is set at $23,000. If you are 50 or older, the limit is even higher. Which brings us to the concept of catch-up contributions.
5. Catch-Up Contributions
A catch-up contribution allows for individuals who are 50 and over to add additional funds to their retirement accounts in an effort to save as much as possible before retirement years. In 2023, the catch-up contribution limit is $7,500 and will most likely continue to increase in coming years. If you meet the age qualification, consider taking advantage of this strategic opportunity to maximize your employer-sponsored 401(k) plan.
6. Work with an Advisor
Lastly, reach out to a financial representative or an advisor. A financial professional can help maximize your retirement savings, even while investing in an employer-sponsored 401(k). Utilizing a second set of eyes may help you identify overlooked investment opportunities, save on fees and find new growth avenues.
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