Contributing to your 401k

Your company’s 401k is one of the best tools for growing your wealth and securing your future retirement. Here are 10 important things you should know

1. Early participation is key

  • The earlier you start contributing to a 401(k), the more time your money has to grow through compound interest.

2. Employer matching is essentially free money

  • If your employer offers a match, try to contribute at least enough to take full advantage of it.

3. Contribution limits

  • For 2024, the annual contribution limit is $23,000, with an additional $7,500 catch-up contribution allowed for those 50 and older.

4. Tax advantages

  • Traditional 401(k) contributions are made with pre-tax dollars, reducing your taxable income for the year. The money grows tax-deferred until withdrawal.

5. Investment options

  • You can typically choose from a variety of investment options, often including mutual funds and target-date funds.

6. Vesting schedules

  • Employer contributions may be subject to a vesting schedule, meaning you must work for the company for a certain period to fully own those contributions.

7. Withdrawal rules

  • In general, you can't withdraw money without penalty before age 59½, except in specific circumstances.

8. Roth 401(k) option

  • Some employers offer Roth 401(k)s, which are funded with after-tax dollars but offer tax-free withdrawals in retirement.

9. Portability

  • When you leave a job, you can roll over your 401(k) to an IRA (Individual Retirement Account) to gain more control or a new employer's 401(k) plan.

10. Automatic enrollment.

  • Many employers now automatically enroll employees in 401(k) plans, though you can opt out if you choose.

Remember, a 401(k) is a powerful tool for building long-term wealth and securing your financial future in retirement. It's important to understand your plan's specific features and take full advantage of this benefit.

Gateway is proud to help people like you maximize their retirement plans

Maybe this seems like a lot of information or maybe you’re already well versed in investing, either way, Gateway is here to help you navigate your current financial circumstances and be a guide towards your future goals. We’re only a phone call, an appointment, or email away for a free, no-obligation discussion about what makes sense for your financial situation.