401(k) Contribution Should Start Early and Continue Through Your Life
It may be hard to think about, but saving, investing and planning for retirement should be a priority at all stages of your life. Although there will always be distractions that can take your focus away from saving for retirement, retirement planning should be something you think about. Here are thoughts about retirement planning at various life stages.
Accumulate Savings With Your 401(k)
1. Your 20s
Making a 401(k) contribution is an easy and automatic way to save and accumulate. Be sure to incorporate a 401(k) contribution into your budget starting as soon as you can. You may not be able contribute the maximum in your 20s, but contribute what you can. Contributions are made each pay period and many plans offer other managed accounts for those who are uncomfortable making their own investment choices. Money invested early has a long time to compound and grow for retirement.
2. Your 30s and 40s
As you move into your 30s and 40s, you'll likely be earning more as your career progresses. This comes with even more distractions, such as starting a family and getting ahead in your career. But remember: Stay focused on saving and investing for retirement. If you switch jobs, you can often keep the money you've started to save with a Rollover IRA.
Try to increase your 401(k) contribution to the point where you're maxing it out each year. According to the IRS, a maxed out yearly 401(k) contribution is $19,500. You still have a number of years to go until retirement, but your money can benefit from compounding.
3. Your 50s and 60s
In your 50s and 60s, you should be hitting your peak earning years. If you haven't been making a 401(k) contribution, this is the time to ramp things up. Individuals ages 50 and up can catch up with an additional contribution of $6,500 annually. Even though you don't have as much time until you retire, these contributions can really add up.
Prepare for Retirement
A few years before retirement, take stock of your financial resources. This includes money in retirement plans such as an IRA or 401(k). Are you eligible for a pension from an employer? What will your social security benefits be, and when should you claim them?
For those on the cusp of retirement, this is the time to be making your final preparations. Do you have the financial resources to cover the cost of your anticipated lifestyle? You'll need to plan your cash flow, incorporating a withdrawal strategy from your retirement accounts, Social Security, pension and other sources of income.
Retire With Peace of Mind
Retirement planning doesn't stop once you retire. You'll need to monitor your situation to be sure you remain on track financially. Planning for retirement is truly a lifelong endeavor that should start early on and continue through retirement. Staying on top of your retirement doesn't have to take a lot of time, but consistent reviews and adjustments can help ensure a successful outcome for you.