Why you should Increase your 401K Contribution

Hello and Happy New Year 2021!!    I know it’s been a while since you’ve heard from me, like many others, last year was overwhelming in many ways.  Year 2020 was going to be the year I kicked off my blog, but instead became the year when many of us were working from home, isolating at home, quarantining at home all while being tied to a computer screen at home.   Quite honestly it has taken me a good number of months to strike a balance between home and work and to get back to the place where I am committing time to my blog.  So, for this brand-new year, I’m hitting the restart button and planning some great posts.   I am starting the year with this recycled Jump Rope Finance 401K tip:

If you are now contributing 3% to your 401K, go to 4% for the coming year.    The goal is to eventually reach 15% towards retirement savings.  If you have not signed up for your workplace 401K, do it today and try to start with at least 2%.   If you have a spouse, have them sign up too.    

Why this tip again?    Because it is something you can do today or tomorrow.   Over the last decade or so, more and more people have become what is called 401K millionaires.    They have socked money away in their retirement accounts and watched it explode thanks to the incredible stock market returns.   Imagine what your retirement years could look like with one million dollars!   Travel, time for hobbies, volunteer work, spending time with family and friends and most of all not having to worry about money.  

I know it seems like a long time away, and you may be asking yourself, why think about this now?   

  • Because on the flip side, most employers have done away with pensions or retirement accounts, so without a 401K your only other options are to continue working or rely on Social Security.   Do you want to be working at age 75 to cover your basic needs?   What about Social Security?    The average social security check is about $1,400 or well under $20,000 per year… for most that is not enough to live your best life. 
  • Because if you start small and increase every year, you won’t miss the extra dollars in your paycheck.
  • Because it feels good to plan for the future and know you have a plan. 
  • Because you don’t want to penny pinch when you retire or have to rely on your kids or family.
  • Because you want to retire early.
  • Because you have time on your side and money grows over long periods of time with steady contributions. 

Just start today… you will never regret putting away a few dollars now that will grow to a huge nest egg over your lifetime.     Next up, reread this post on creating a financial binder.  Grab a three-ring binder and start your financial binder.  Over the next few months, I am going to begin to walk down each of the tabs to create financials that go behind each section.  Next week’s post will be on creating your net worth statement.   This first step is a game changer as you plan your future!   So, read over the post, grab a binder, the free printable index page, and stay tuned for next week.  Until then, Happy New Year!   2021 already feels more promising!

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