Tuesday, January 5, 2010

increasing the value of your 401K

your #401k will grow significantly more if you contribute to it than if you don't. have you been out of work this year, on reduced work or #furlough, #unemployment or had a spouse going through one of these events typically seen in a #recession?

well, signs are pointing towards a more positive future. as people start to enter the workforce again family incomes will be increasing. you made it through last year alright, so now consider this "extra" income for your family.

take that money and put it in your #401k. #retirement is coming faster than you think. if you were on a 10% paycut for example, like i was, when you get that 10% back increase your #401k by 10%. if your spouse was out of work and now has a job that could mean a 100% increase in pay so set both #401k account contributions to 15%.

and remember the annual max to contribute to your #401k as a tax deduction is $16,500. that is 15% of a $110K annual salary. if you make less than $110K annually see if your account manager will let you contribute more than 15%!

~#frugal phx

1 comment:

  1. Most 401k's don't limit the percentage of an employee's salary that the employee is allowed to contribute. Instead, they let the IRS annual max ($16,500 for 2010) be the upper limit. If contributing more than 10% seems higher than you can manage right away, try getting there in annual increments of 1% of your gross pay. For example, let's say you're currently contributing 5% of your salary and you make $50K/year. An additional 1% would be another $500/year. Divided by 24 (assuming you're paid 2X/mo) and that works out to about $21/check. Remember that would be $21 on a pre-tax basis. What you are going to miss from your paycheck is only about $16. I challenge anyone to notice a difference in their lifestyle by having 1% less in their paycheck after taxes. Mark your calendar to make another 1% increase the same time next year, and before you know it, you're contributing some real $ to your account. Don't get me wrong, the previous suggestion of contributing 10%+ now is a much faster way to get there, but for those of you who simply can't get your head/budget around that number, start small BUT AT LEAST START!