I’ve had a couple readers share with me that even though they probably could max out their 401K, they don’t. I totally get it – it’s tough to do. If everyone’s strong suit was willpower, we’d have a bunch of rich, skinny people walking this Earth!
Here are a couple of ideas to help you max out that 401K and get yourself on the fast track to an early and/or prosperous retirement:
- Daydream: I kid you not. This works for me. Lloyd and I often talk about our summer beach house and our winter ski trips that we plan to take when we’re retired. Not only retired, but retirees with smokin’ hot bods…
- Stay In Shape: Yep, you read that right. I think that so many (young) people think of retirement as the end of the good part of your life. You’re not a young adult anymore, your body is shot, and you have to wear diapers, right? NO! 50, 55, 60, 65 is FAR from old – and even further from the end of life. Keep that body rockin’ and you’ll be able to live retirement like a feisty young whipper snapper.
- SSS (Start Small Silly): A masterpiece isn’t completed in a day, nor is a 401K. Now, don’t take advantage of the “start small” tip by contributing an extra $10 a year. Instead, try to contribute an extra $50-$100 every month. Before you know it, you’ll be maxing out. And if starting small doesn’t work for you…
- Go All In: Max out all at once. Change your contribution amount and never look back. This is how I did it and it worked for me. If you need a support system, round up the nearest personal finance blogger and have them do the clicking for you.
- Keep more of your own money: Story time…last year I contributed 5% of my income to my 401K. I paid about $9,700 in federal income taxes. This year, I will make $3,000 more than I did last year and I’m contributing about 23% to my 401K. Guess how much I’m going to pay in taxes this year? About $7,000 in federal taxes in 2009. Not only did I get a pay raise from my employer, but I’m also getting a pay raise from the government in the form of lower taxes…to the tune of almost three-thousand smackers!
- Expand Your Mind: Truly, the big picture is that the more you invest from a young age (e.g. twenty-somethings should max out), the more time that money is invested, the more money you walk away with in the end. I used my handy-dandy balance projection calculator on my 401K website and came up with this:
- A Load Off: Maxing-out your 401K in 2009 and beyond…$16,500. Knowing you’ll be financially secure in your golden years…priceless.
As you can tell, I’m a big advocate of the 401K Max-Out. Even though it’s tough putting aside all of that money today, I know how much more rewarding it will be in the future. After all, it’s the most difficult obstacles in life that have the biggest payout (pun intended).
Question: Are you maxing out your 401K? Why or why not?