For many people the only real nest egg they have for retirement is their 401K plan, and though 401Ks won’t always give you the retirement income you desire, you need to make the absolute most of your account because some savings is better than no savings. The true value of your 401K account depends on a few different things – how much you earn a year, how much of your earnings you save, how many years before you actually retire and how well the stock market performs during that time.
Here are 7 simple strategies for growing your 401K account so you can have as much retirement income as possible.
1. Set Up a Roth 401(k) Account if You Can
The contributions you make to a traditional 401K plan are tax deductible, but the money you invest into a Roth 401K isn’t. So, when you do finally retire and withdraw from your Roth account, none of those withdrawals will be taxed, not even the money you have earned from capital gains, interest and dividends.
You may be thinking that taking the tax deduction now seems like the smarter choice, but most individuals and families don’t really save that much by deducting 401K contributions. You’ll be much better off avoiding taxes on your earnings because after years and years of growth they will make up the majority of money in your 401K account.