Reaching a balance of $1 million or more in 401(k) accounts is possible for average workers especially if they follow a few basic principles to help them successfully prepare for retirement. Below are five of these principles, including how you can apply them to your retirement plan.
Start Early: A powerful tool when it comes to saving for retirement is compound interest. Compound interest refers to the interest you gain on a deposit. Starting early, adding money to your 401k regularly and remaining invested can help grow your 401(k) account.
Maximize Your Contributions: For 2021, employees can contribute a maximum of $19,500 to their 401(k) accounts, and employees who are over the age of 50 can contribute an additional $6,500.
Make the Most of Your Employer’s Match: Many employers offer to match their employees’ 401(k) contributions up to a certain percent. Failing to meet this match is like leaving free money on the table. At a minimum, you should consider contributing the minimum amount necessary to earn your employer’s match.
Choose the Right Asset Allocation: Asset allocation of the funds in your 401(k) is one of the most important determinants of investment earnings over time. When investing in your 401(k), consider your time horizon and risk tolerance when choosing your 401(k) investment allocations. In addition, it is important to
periodically review your 401(k) asset allocations. Depending on how far you are from your retirement goals, you may need to increase your contribution rate or adjust your investment mix.
Avoid Cashing Out Early: Resist the urge to cash out your 401(k) early, even if changing jobs. Early withdrawals can come with tax consequences and other penalties. It may be possible to roll the old 401(k) balance into your new employer’s 401(K) plan. If rolling over to a new employer plan is not possible, rolling over the old 401(k) to an Individual Retirement Account (IRA) is also an option.
If you are interested in an IRA or need information on 401(k) rollover options, a Financial Advisor at TFCU Financial Advisors can help you.
TFCU Financial Advisors
6501 Tinker Diagonal, MWC
(405) 737-0006
TFCUFinancialAdvisors.org
Securities are offered through RAYMOND JAMES FINANCIAL SERVICES, INC., Member FINRA/SIPC, and are not insured by NCUA or insured by any other government agency. Funds are NOT GUARANTEED nor are they deposits or obligations of the credit union or any affiliated entity of the credit union, and are subject to risk, including the possible loss of principal. Tinker Federal Credit Union, Tinker Financial Services, LLC and TFCU Financial Advisors* are not registered broker/dealers and are independent of Raymond James Financial Services, Inc. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc., a non-affiliated third party provider to Tinker Financial Services, LLC and Tinker Federal Credit Union. All investments and information are intended for U.S. residents only. *TFCU Financial Advisors is a registered trademark and ‘dba’ of Tinker Financial Services, LLC.