When Should You Contribute To A 401(k)?

We have all heard about savings and investments. Whether we do it or not, it is now easier than it has ever been to put money away towards our future as retail investors. Not only are platforms like Acorns, Stash, and Robin Hood more commonplace and easily accessible, but more and more jobs are giving employees access to 401(k) accounts. This is even true for your retail jobs and restaurants. If you haven’t taken advantage of such an account, but want to know more, follow along to learn when you should contribute to your 401(k) account.

Now

The time is now. If you have never invested a penny of your money, start investing in your 401(k) account now. This is especially essential if your employer offers a match. I don’t care if the match is 1% or 10%, don’t leave free money towards your retirement on the table. It took me three years of leaving money on the table to realize that I missed out on financial opportunities by not taking advantage of my employer match. If you’re not financially strapped, get every penny. If the match is 5%, contribute 5%. Over time, this can add up to tens of thousands of dollars in free money fully vested by your employer.

After A Raise

Another opportunity to contribute more to your 401(k) account would be when receiving a raise. A lot of people see a raise as a way to get more out of life than what they have now. Raises contribute to lifestyle creep, which leads us to spend more money than we can realistically afford. Instead of using that money to buy something you do not need, up to your contribution limit. Every time I get a raise, I raise my contribution by at least 2%. It doesn’t necessarily matter to me that my employer’s contribution will not go up with mine, but it does keep me from unnecessary spending and meeting savings goals for my future.

Over 50

If you’re over 50 and just now getting into the investment game, don’t worry about being behind. There is a thing called a 401(k) catch-up contribution for people ages 50 or over. Instead of only being able to contribute $19,500 yearly to your account, you will be able to top out at $26,000 per year outside of whatever your employer contributes. If you have the means to stash that much away, it can help you reach your retirement goals a lot faster. Just remember there is never a wrong time to get started saving for your future.

Overall, 401(k)s are one of the easiest investment accounts you can start. They are more accessible now, as many employers are offering them to employees. At the very least, you should get every penny of free money that your employer is willing to give you by contributing max match. If you do this and stay consistent, at retirement, you will be well-taken care of.

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