Retirement Planning

Tips to Maximize Your 401(k)

Most employers today provide a 401(k) savings plan to their employees, but statistics show that most employees are not taking full advantage of this critical employee benefit. There are a multitude of reasons people are not saving enough through employment plans. Some struggle because life is expensive and if you are raising a family there are a lot of competing expenses. Others simply don’t take the time to study their 401(k) or 403(b) plan and rank savings in a plan as a top priority.

Budgeting life expenses after you earmark your savings is a much more effective approach than going through all of your expenses and then saving what is left over. Most retirement plan participants do not increase their contributions commensurate with pay increases over the life of their career; it is important to adjust your savings upward as compensation increases. Oftentimes participants in employer plans start their savings strategy too late, which impacts the time aspect of savings growth; starting at a younger age with a larger percentage of your salary is important.

Here are some functional tips to increase your 401(k) effectiveness:

  • Start as early in your career as possible; it may not seem like you are saving a substantial amount, but time is the best method for growing assets (urge your adult children to start young).
  • Make sure you contribute to maximize your company match; most employers match a percentage of your contribution so it is important to maximize the match.
  • Increase the amount you save each time you get a raise with the goal of maximizing your contribution to the extent permissible under the law.
  • It is never too late; if you have been lax in contributing you can start now to make up some lost time.
  • Try not to borrow against or take premature distributions from your 401(k), this can be very costly to your long-term savings.
  • Use a diversified approach to investing and take advantage of automated features such as quarterly portfolio rebalancing.

One of the benefits of a 401(k) is that it is portable, meaning once you leave an employer you can take the account with you and move it into your new employer’s plan or an IRA. Either way, your accounts can be combined into one account making the tracking of your investments easier and more transparent. One of the advantages of moving your old 401(k) to an IRA is you will have more control over investment selections and likely more choices as you are not restricted by the list of investments available in an employer plan. You can manage the IRA on your own or hire a financial professional. To discuss planning for retirement including your current 401(k) and any legacy accounts from former employers, please contact us at 888-578-0770.

Securities and insurance products are offered through Univest Investments, Inc., member FINRA/SIPC and a licensed insurance agency. Investment advisory services are offered through Girard Partners, a Univest Wealth Management Firm. These affiliated companies are licensed subsidiaries of Univest Corporation of Pennsylvania. Products and services offered are not FDIC insured, are not a deposit of or bank guaranteed, and are subject to risks, including possible loss of any principal amount invested.


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