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How to Grow Your 401k Account Faster

Chances are you don’t give an employer 401k account too much thought. But a 401k account can be a significant retirement source of income. If you’re young and you’re lucky enough to work for a company that offers a 401k plan, it makes sense to grow it and retire rich.

There are many reasons to participate in a 401k plan. One is that most employers will match  a portion of the amount of money you put into the plan.

Another reason is that the money you’re contributing is tax deferred until it’s time for you to withdraw it.

See how to allocate your assets to boost your retirement savings.

Read more5 Reasons Why You Will Retire Broke

What is a 401k plan and how does it work?

A 401k plan is a retirement savings plan provided by your employer. As an employee, you can choose how much to contribute to your 401k account. All of your contributions and earnings are tax-deferred. You only pay taxes on your contributions and earnings when you withdraw money.

So your money will grow tax-free for many years.

So a 401k plan can be a great source of income for your retirement.

See How Much You Need to Save for Retirement

How much to put in a 401k account?

When it comes to how much money needed to retire, most Americans have no clue. According to a survey by GoBankingRates, half of Americans have less than $10,000 in their retirement savings.

But even if you don’t know how much money needed to retire, you still can grow it using these four steps below.[

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Here are the 4 ways to grow your 401k account

1. Refrain from borrowing from your 401k account.

The first way to grow your 401k account is to refrain from borrowing from it.

As financial planner  Bob Mecca, founder of Robert A. Mecca & Associates once said, “many people don’t have enough saved for retirement in the first place, and when they take their 401k out of the equation and borrow the money…then that money is no longer working for their retirement needs.”

One main reason to stop borrowing from your 401k account is to avoid fees and penalties. A personal loan is a better option.

If you take some money out of your 401k account before you’re 59 1/2, you’ll get hit with 10% penalty for the early withdrawal and owe income tax on the amount withdrawn.

Borrowing from your 401k account is acceptable only under urgent circumstances. For example, if you cannot get qualified for a loan or no family members would loan you any money for an emergency, it would make sense to borrow against your 401k account.

Another way borrowing from your 401k account makes sense is if you’re using that money to purchase a home.

So borrowing against 401k account is not advisable unless you absolutely have to.

Consider getting a personal loan instead of borrowing from your 401k. Find the lowest personal loan rate today.

2. Make it automatic.

Don’t wait until you get your paycheck to put money into your 401k account. The easiest way to grow your 401k balance is to ask the HR at your company and ask them to have a percentage of each paycheck automatically transferred into your 401k account.

That way you’re not tempted to spend all of your money and you’re not worried about forgetting to contribute every month.

3. Contribute the maximum allowed by law.

Some people will contribute the maximum amount for which they’re eligible to receive matching funds. But if you want to grow your 401k account, try to contribute the maximum allowed. The maximum 401k contribution for 2018 $18,500.

4. Always take advantage of your employer’s match.

A 401k match is the best way to grow your 401k account faster. Many employers will match contributions to your 401k account which can be from 0% to 100% of your contributions.

For example, if your employer will give you 50 cents for each dollar you save, that’s a 50% return on your investment.

In conclusion, a 401k account gives you an immediate tax break of hundred of dollars each year. It makes sense to grow it and retire rich.

If you’re not lucky to work for an employer that offers a 401k plan, you should start investing in an individual retirement account (IRA).

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Work with the Right Financial Advisor

You can talk to a financial advisor who can review your finances and help you save 100k (whether you need it to pay off debt, to invest, to buy a house, or plan for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

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