Alex Thomas Salder, clarkhoward.com
There are several options for you to save for the future, but one of easiest ways to start saving for retirement is if you have 401(k)plan available at work.
Let’s say you just started your first job, or maybe you’ve been in the same job for a while and decide you’re ready to start saving for retirement. Your employer offers a 401(k) but you don’t know how to get started or even what a 401(k) is.
How to get the most out of a 401(k)
Here’s a 401(k) in nutshell: a 401(k) is a retirement savings account offered by your employer, so the company you work for.
It lets you save and invest a piece of your paycheck before taxes are taken out, and then you don’t pay any taxes on the money in a 401(k) account until you withdraw from it — ideally, when you’re retired.
If your employer offers a match on your 401(k) contributions, then ideally, you want to put in at least enough to get the match. For example, many companies will match 50 cents on the dollar up to 6%.
So let’s say you’re making $30,000 and you put 6% of your annual salary into your 401(k), which is $1,800, then your company will put in 3%, so another $900 — totaling $2,700 a year.
Matching plans vary, so make sure to check with your company to find out exactly how much they will match.
When you’re just starting out and can’t quite afford to contribute that much, start with just 1 percent — you won’t even notice it missing. Then every six months, bump that up by another 1 percent, and after just a couple of years, you’ll get pretty close that 6%!