For most people their 401k is the single best tool for saving for the future. This article will help you take maximum advantage of it.
Be thankful that you have a 401k. Only about half of American workers do.
Enroll. Sounds obvious but of the workers who have a 401k to enroll in a large number never do.
Figure out how much your company matches contributions. If you can possibly afford it contribute at a level that maximizes this match. If your company matches your contribution up to 4%, save 4%. If you don’t contribute the whole match you are leaving money on the table. The company contribution is part of your pay. Never forget this. Your company doesn’t.
Understand the tax benefits of your 401k. Since 401k contributions are pretax you can significantly lower your taxable income. If you make $50K per year and save $4K in your 401k you lower your taxable income off the top to $46K.
Then figure out the match made by your company pretax and you can see that one is quickly talking significant money.
Contribute well over the match if you can. For most folks to live at the level they would want to live at in retirement a goal of saving about 15% to 20% of income is about right. No kidding, 15%-20%.
Go to one of the many retirement calculating tools on the internet and run a hypothetical for yourself. This will factor how long you have to save, current income level, and desired life style in retirement.