Powering Up Your 401(k)
In some good news for 2022, contribution limits have increased for 401(k)s. For those looking to max out their 401(k)s in 2022, you can contribute $20,500—an increase of $1,000. For workers over the age of 50, the catch-up 401(k) contribution is still an additional $6,500 per year. Contributions to your 401(k) are made on a pre-tax basis, meaning you don’t pay income taxes this year on money put into the fund. This can help lower your overall taxes. Additionally, saving for your retirement now will help you have a better retirement later.
Early Retirement – If you’re dreaming of a day when work is just an option, powering-up your 401(k) contributions now can help you get there faster. Having retirement savings increases the options available to you in retirement. You can choose to start a second career following your passions, or do nothing at all. A healthy nest egg will give you that option.
Full Company Match – In many cases, your employer will match your 401(k) distributions dollar for dollar up to a certain amount. A company match is a great way to save additional funds each year, and if you aren’t contributing enough to get the full company match, you are missing out.
Compound Interest – Compound interest is a way to super-charge your savings; and the earlier you start, the better. For example, with the help of compound interest, you could become a millionaire over your working life by saving just $140 per month. This is assuming you start working and contributing to a 401(k) at age 22 and continue to do so until age 65, as well as earn an average of 10% per year on your investments. And, if you take advantage of a company match, you can contribute less to meet that $140 per month amount.
Wherever you are today, and whatever age, look for ways to increase the amount you are saving for retirement. Having a plan can help tremendously, and changes can be made more easily.
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This content is provided for informational purposes only. It is not a guarantee of future success, is subject to change, and is not intended to serve as the basis for an individual’s financial decisions. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Strategy Financial Group does not provide specific legal or tax advice. Please consult with a qualified professional for guidance on your individual situation. Investment advice is offered through Strategy Financial Services, LLC, a registered investment adviser. Insurance and annuity products are offered separately through Strategy Financial Insurance, LLC.