Your best investment is investing in yourself. With good guidance, a sound strategy, and a long-term commitment, your 401k could be what makes your retirement dreams a reality. This blog post will cover six steps you can take to help you get the most from your retirement savings.
1. Pay yourself: invest early, no matter how small.
As a 20- or 30-something-year-old, time is on your side. This means with compound interest, the money you’ve contributed could grow exponentially by the time you cash that last paycheck. The rule of thumb is to contribute 15% of your income. However, that may not be realistic, depending on your financial situation.
So, don’t focus on the amount—start small. And as you get a raise, give your investments one as well.
2. Get free money: maximize employer matching.
Many employers offer a matching program—often between 50-100% of your contributions up to a specified amount. That’s free money for you! Too many Americans miss out on this opportunity by either not opting in or not contributing the maximum matched by their employer.
Don’t be the one to leave money sitting on the table. Ask your employer if they offer this benefit.
3. Expand your options: supplement with a Roth IRA.
Employers choose the investment funds available within a 401k, which means the options selected may not fulfill all your retirement goals. It’s essential to have the flexibility and freedom to pick investments that do. As long as you qualify, a Roth IRA allows you the opportunity to work with a financial advisor to choose investment options that fit your needs now and will help you make adjustments into the future.
If a 401k isn’t an option for you—or your employer doesn’t offer to match—a Roth IRA is a great option.
4. Diversify investments: derail single-track investing.
With stocks, you could see your retirement funds grow fast. But with that comes risk since stocks can be more volatile than other investment options. Taking a balanced approach of 80% stocks and 20% cash and bonds—or a similar ratio—might be a better choice.
5. Find balance: save while paying off debt.
Saving for retirement isn’t likely your only financial goal. This means you’ll need to find a balance when it comes to saving for retirement—or other savings goals—and paying down debt. So, what do you do?
First, don’t use debt as an excuse. Make your future a priority, even if it means lowering your contribution amount to fit your budget. Then, as you pay down your debt, reallocate funds towards retirement by setting up payroll deductions.
6. Ask the Pro: get advice from those who know.
Seeking advice or guidance from a financial advisor will help you rest a bit easier knowing someone’s got your back. An advisor will help you assess your personal situation and make recommendations to help you reach your goals. Our CFS* Financial Advisor, Monaye Nelson-Morgan, can help. To get started, contact Monaye at (858) 530-4495 or firstname.lastname@example.org.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk, including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Before deciding whether to retain assets in an employer-sponsored plan or rollover to an IRA, an investor should consider various factors including, but not limited to: investment options, fees and expenses, services, withdrawal penalties, protection from creditors and legal judgments, required minimum distributions and possession of employer stock.