Welcome back to Powering Your Retirement Radio. I am Dan Leonard your host. You can take a few steps to set yourself up for 401k success.
You can take these steps to maximize your 401(k) regardless of your age.
Steps:
- Enroll! Stop procrastinating - the sooner you start, the bigger your balance will be later.
- Contributions
- Start with any amount, just start
- Annual Automatic Increase - most plans allow you to automatically increase your contribution rate annually. Time it to when you get your annual pay raise. For my PG&E clients, that would be on your March check.
- Shoot for 10% or 15%
- Don't overdo it when you are younger - under 35-year-olds usually have competing goals like getting married, having kids, and buying a home. Target maxing out your match.
- Prioritize savings once life goals are achieved
- Take advantage of the Catch-Up Contribution amounts at age 50.
- Matching - Try to contribute enough to maximize company matching.
- Spillover - If you can afford to contribute more and the plan allows for excess contributions.
- Mega-back Door Roth - In 2021, you could have contributed $58,000 plus the 6,500 Catch-Up contributions (for those 50 and older). The $58,000 includes your elective deferral, company matching, plan allocations of forfeitures, and after-tax employee contributions (spillover).
- Higher Wage Earners - take advantage of when you hit the wage base for Social Security of $147,000(2022) and the 6.2% Social Security tax stops being deducted. Increase your contribution rate for the rest of the year.
- Other:
- Start early and be consistent.
- Use the Catch-Up contribution when you reach 50.
- You control how much you save and how long.
Until the next Episode, stay safe!
For more information visit the podcasts website: https://poweringyourretirementradio.com/set-yourself-up-for-401k-success/
