3 Good Reasons Why You Should Increase Your 401(k) Contributions

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

While there is no rule that says you have to contribute a certain amount to your 401(k) to be successful in preparing yourself for retirement, there is a general rule of thumb that you can follow if you want to get the most out of your efforts, and that's to increase your contributions when you can.

Whether you start contributing just 2% and work your way up or start at 10% and work your way up, any time that you feel comfortable financially and feel you can contribute just a little bit more, you should - here's why:

1. It may make you eligible for an employer match. 
If you are not yet contributing the amount required for your employer to contribute on your behalf as well, this is a hugely important reason why you should up your percentage. You can essentially look at employer contributions as free money, so although it may be taking a little bit more out of your paycheck, you'll be getting even more in return!

2. You'll receive greater tax benefits.
401(k) plans are typically contributed to on a pre-tax basis, so the more you contribute, the greater tax benefit you'll receive. In addition to your taxable income being less in your paycheck, you may even be moved into a tax bracket that is more favorable for your personal financial situation.

3. It leaves you with less to spend.
While this may seem like a downfall, if you look at it from a different perspective, it could actually help you. That's because the less money you take home right now, the less money you have to spend on unnecessary purchases! Not only can this help you become more financially responsible, but it could also help you get better at sticking to a budget (and you'll be saving more while you're at it!).

Now, this isn't to say that you should immediately increase your contributions even if you're struggling financially, but what it does mean is that when you are feeling comfortable, you should at least give it a try and see if you can swing it - the benefits now and later will be well worth it!

Here at American Investment Planners LLC, we have financial advisors who specialize in retirement planning, so if you have questions about your 401(k) contributions, we would be more than happy to help! To schedule an appointment, please call (516) 932-5130 or email info@americaninvestmentplanners.com today.