Benefits of Pumping More Money into Your 401(k) for Enhanced Financial Growth
Why Increasing Your 401(k) Contribution in 2024 Could Boost Your Future Wealth
Pumping more money into your 401(k) could benefit you in more ways than one. You might think that participating in a workplace 401(k) is a no-brainer. But for some people, that's just not doable.
If money is tight, you might struggle to carve out room for retirement savings. The same could hold true even if you spend very frugally but don't earn a very high wage.
The good news, though, is that in 2023, 37% of workers increased their 401(k) contribution rate, according to recent data from Fidelity. That's in spite of a period of lingering inflation. And here are a few reasons you might want to follow their lead in 2024.
- You can shield more income from taxes: Most of us would probably prefer to pay the IRS as little money as possible. The more money you put into a traditional 401(k) plan, up to the annual contribution limit, the more income you can shield from taxes.
- You might be able to get more free money from your employer: Many companies offer 401(k) plan participants some type of matching incentive. If you didn't manage to snag your full employer match in 2023, ramping up your 401(k) contribution rate this year could mean collecting every matching dollar you're entitled to.
- You'll have more opportunities to invest for your future: If retirement is pretty far off, you might not be so motivated to increase your 401(k) contribution rate this year. But remember: The sooner you put money into a 401(k) -- or any other retirement plan, for that matter -- the sooner you can start investing it.
Allocating more money to your 401(k) isn't easy. But if you're able to do so this year, you could benefit in more ways than one.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.