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Getting the Most out of Your 401(k): Save More

It’s never too early (or late) to save more for your retirement.

Nov 19, 2014

Getting the Most out of Your 401(k): Save More

This is the second of a seven-part series to help participants get the most of their 401(k) plans.

Whether or not your employer offers a 401(k) plan, you can always find a way to save for retirement. The first step is to start saving. Here is the next step of the journey.

If you are saving, are you saving enough?  Could you save more? Clearly, increasing your savings rate over time will give your savings a boost. As with the decision to start saving, the decision to increase your savings can be done in painless increments.

Many plans allow savings rate changes without limit. If so, try increasing your savings rate gradually…you can always dial it back if needed.

Time your savings increases by tying the increased savings to an increase in pay.  This way, both you and your 401(k) get a raise.

Many plans offer pre-scheduled, regular increases to savings rates, also known as “automatic escalation”. This automation is a great way to reach the optimum savings rate. If 10% is your savings goal, but you cannot imagine giving up more than 4% of your pay now, you could begin saving 4% now and schedule annual increases of 1-2% until you reach your goal of 10%. With the decision already made and implemented, you do not have to worry about remembering to increase your savings rate over time.

Ready for the next tip? Here is part 3 on how to get the most out of your 401(k)!