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Your 401K and Your Retirement Money
The most important thing is to start saving early – giving your money time to
grow. After that there are a number of techniques that can help:
• Take maximum advantage of a 401K plan – your employer may also contribute, in
effect giving you free money. Another advantage of a 401K is that the money is
taken directly from your pay – so you don’t miss what you didn’t get.
• Every time you get a pay rise immediately increase your 401K
contributions. You don’t need to increase them to take up your whole
pay rise, but dedicate some of it and once again you won’t miss the
money as you didn’t get it in the first place. This technique can
really snowball and give you some significant contributions in later
years.
• You can also apply this strategy to other wind falls, things like bonus
payments, tax refunds and inheritances – save some money as soon as you get the
cash. If you put the money away as soon as you get it, then you won’t miss it.
• Make a plan. Start with working out how much you will need to live on in
retirement. Most financial advisors say you will need approximately 70% of your
current pay for retirement. Then work out how much you will need to have in
retirement savings to have that amount.
This may not sound like a lot of fun, but planning properly for retirement may
also give you a chance to look at your current finances and improve them.
Every cent counts. A few pennies here and there may not mean much at the time,
but it all adds up. As they say in England “look after the pennies and the
pounds will look after themselves”
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