MoneyDo: Review Your 401(k) Contribution
Do you know how much you’re contributing to your 401(k) account? Many Americans aren’t sure. In fact, about 2/3 of Americans aren’t even invested in their company’s 401(k) or retirement plan. If you aren’t invested, you should start as soon as you can.
If you are currently contributing to your employer sponsored 401(k), your MoneyDo this week is to review your 401(k) contribution.
Most 401(k) providers provide online access to your account, and many send out statements through the US Mail regularly.
Even if you know the percentage you contribute, it’s a good time to review it and consider if you can increase it. About 1/3 of Americans are contributing less than 4 percent to their retirement account[1].
- When you look at your account, determine what percentage you’re contributing
- Determine up to what percent (if any) your employer matches contributions
- Most experts agree that your contribution percentage should AT LEAST mirror your company’s match percentage
- As you approach retirement, consult with a financial planner regarding your 401(k). There are valuable tax strategies involving your 401(k) that can be implemented prior to and just after retirement.
How much should you be contributing? The “should” part of that questions depends on key components like your plan, your goals, and your age. Most experts agree that the younger you start, the lower the percentage you’ll need to be setting aside – but the low end of recommendations hovers around ten percent[2][3].
If you’re wondering the maximum you can contribute to a 401(k) for 2019, the answer depends on your age. The maximum IRA contribution is $19,000 if you’re younger than age 50. If you’re 50 or older, you can add an extra $6,000 per year in “catch-up” contributions, bringing your total 401(k) contributions for 2019 to $25,000.
Remember – if you have questions about your 401(k), make sure to ask your provider. They’re required to have someone ready to serve you.
[1] https://www.fool.com/retirement/2017/01/15/average-americans-401k-contributions-by-age-and-in.aspx
[2] https://www.thebalance.com/how-much-should-i-put-in-my-401k-453991
[3] https://money.usnews.com/money/retirement/401ks/articles/how-much-should-you-contribute-to-a-401-k
