Many people struggle to decide just how much they should contribute to their 401(k) plan to get the biggest benefit for themselves. Most people try to contribute at least as much that their employer agrees to match to their 401(k) account, if their employer offers matching contributions to its employees, to get the most out of their plan. However, you should also consider if you want to make extra contributions to your 401(k) in addition to those your employer matches.
Things to Consider
Before you decide if you want to contribute more than the amount your employer will match to your 401(k) account, you should first take some things into consideration. Think about how stable your job is, if there are many layoffs happening in your industry and what the economy is looking like currently. If there are any of these red flags arising, you should be sure you have enough money available to you, so that it is accessible in case you need it. You can visit the Suncorp Superannuation website here & learn more about planning for your future.
You should try your best to have living expenses covered for at least three months, if not more, especially when the economy is not doing very well. On the other hand, if you have adequate savings, a stable job and no huge upcoming expenses to take care of, then you may want to consider contributing a bit more to your 401(k) account to get an even bigger benefit from it down the road.
To find out what amount is right for you to contribute to your 401(k), there are plenty of budget calculators available online that can help you make sure you are staying on track with your spending and saving. You can also use investment calculators to see how much your contributions will make you over varied lengths of time to try to determine what amount of contributions will work best for your needs.
The Benefits of Making Extra Contributions to Your 401(k)
If you are able to afford to make extra contributions to your 401(k), there are a number of benefits to consider. First of all, the more you put into your account, the more you will end up with in appreciation and interest, and the more you have in principle, the faster your interest will grow, giving you more money in the long run. In addition, all of your 401(k) contributions are tax deductible because these types of accounts are tax deferred, as you will not be paying taxes until you take disbursements from your 401(k) account when you are retired.
So, in the years leading up to your retirement, your money will continue to grow. All in all, if you are able to afford it and aren’t at risk for any financial problems in the near future, you should definitely contribute extra to your 401(k) to get the long term benefits out of the account, and if possible, you should even consider maxing out your 401(k) account to get the biggest benefits possible.