Tags: Retirement | 401k contribution | tips | increase

5 Tips to Increase Your 401(k) Contribution

By    |   Monday, 27 Apr 2015 11:53 AM

Your 401(k) contribution can make a huge difference in your retirement savings when you start putting as much money as you can into your account. With the advantage of employer matching funds, your 401(k) can provide you with a comfortable retirement.

According to US News, the IRS increased the maximum contribution to $18,000 in 2015. Employees who reach age 50 can add another $6,000 to their plans. Here are five tips to build up your retirement savings by increasing your 401(k) contribution:

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1. Smart401k recommends increasing your contribution by 1 percent each year. You want to maximize your contribution to reach the limit the IRS allows if you haven't already. Even if you can't maximize your contribution now, the small increase each year helps bring stronger returns for the investments in your plan.

2. Make that 1 percent increase in contributions each time you get a raise or a promotion that brings you a higher salary. Actually, a raise in your salary is a good way to use most or all of your added income to the 401(k) plan. It's a painless way to pad your account because it's money you haven't had before, reports U.S. News. If you can live comfortably on your previous year's salary, invest for the future with your newfound money.

3. Many companies offer their employees automatic contribution increases, often at 1 percent. Some companies encourage workers to participate in the plan while others require requesting you be included in the automatic increases. Talk to the plan administrator or a person in the human resources department of your company to include yourself in the automatic program.

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4. Take a good look at your budget to see the expenses you don't really need in order to contribute more to your 401(k) plan. US News recommends making a list or track your expenses to separate the things that are necessary spending from items or events you don't really need. Maybe you can cut down on the times you eat out or the shows that you don't really find enjoyable when thinking about it. Use those extra funds to help maximize your contribution.

5. Take advantage of tax deductions for contributions to your 401(k) plan. The $5,040 you could save in federal income tax by getting into a lower tax bracket could be used for your retirement savings now. The extra savings comes in handy when you retire. Most people fall into a lower tax bracket when they retire, which means paying less on distributions.

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Your 401(k) contribution can make a huge difference in your retirement savings when you start putting as much money as you can into your account. With the advantage of employer matching funds, your 401(k) can provide you with a comfortable retirement.
401k contribution, tips, increase
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2015-53-27
Monday, 27 Apr 2015 11:53 AM
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