New year marks good time to increase your 401(k) contribution
InvestigateTV - Saving more money is often at the top of the “to-do” list for the new year, but are you still following through?
Now is the time to increase what you are putting into your retirement accounts, especially if you get a raise. If it’s a three percent raise, increase your 401k contributions by one percent, so you never miss that extra money in your paycheck.
Michael Joyce with the financial firm Agili said even if it’s just one more percent, try it.
“A bigger reason for doing that is because you’re going to have in essence tax free compounding of growth, certainly tax deferred because you’re not going to pay taxes on this until many years in the future,” Joyce explained.
Joyce added that you should increase your contributions until it hurts. If you think you are at your threshold, add another percent and see if you really are. You can always contribute less if you find you need the money now in your paycheck.
Also, if your employer matches how much you put into your retirement account by three percent or four or five percent, at least make sure you are getting that match. Joyce said that’s free money and you should never pass up.
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