Nowadays, everyone must think about how to save for retirement. Social security is no longer a reliable source of income in your golden years. You must take personal responsibility in ensuring that you have enough money to use during your retirement.
One thing that many employers offer to their employees is a 401K program. This is a great way to start saving, and it offers many advantages over other ways of saving. Read this article to learn how you can maximize your benefits.
Money invested in a 401K need time for it to grow. The sooner you start contributing to it, the more time it will have to grow. If you have 20 to 30 years to retirement, a small contribution made today can grow into a significant amount.
Many employers offer a match to the amount contributed by its employees. If your employer offers that, be sure that you at least contribute up to the percentage of your salary that your company will match. This is like an instant, guaranteed return on your money, in addition to what you will gain from your investment. This is one of the biggest benefits of a 401K.
Some companies also offer profit sharing to the 401K. Inquire at your benefits department about how to qualify for that.
Your 401K plan offers you a variety of funds in which you can invest your money. This choice is totally up to you. To find the most appropriate funds for you, consider your risk tolerance. Are you the type that likes to see slow but steady growth on your money with little risk, or do you like to risk a little more for potentially bigger rewards?
Cash funds, like money market funds, have the least risk because the value stays constant at $1, and you earn interest on the money. Stock funds are much riskier because their performance is impacted by the health of the economy and the profitability of corporations.
If you are relatively young, and your risk tolerance is high, you can weather the dips in the economy and hold steady until the market rises back up to realize your gains. That is because your time horizon is longer and there is more time to wait for recovery. If you are close to retirement age, it is best to invest in something more conservative so you will not be stuck cashing in when there is a slump.
Sometimes companies will offer retirement workshops to help its employees sort through the maze of choices. If those are offered to you, take advantage of them. This will provide you will a great opportunity to learn all about your options.
Avoid dipping into your 401K for money, unless you have a real financial emergency. Your retirement may seem many years away, but the money in your funds need time to grow.
If you plan your 401K strategies well, you will be ensured that you will have enough in retirement. Take care of your money now, so it will take care of you in your golden years.