Easy Money: Take Advantage of 401(k)

Long gone are the days of traditional pensions. With so many companies offering 401(k) plans, how successful you are in saving for retirement is up to you. Here’s some advice to help you engage in your 401(k) and how to maximize this opportunity:

* Take advantage of your company match. Contribute at least as much as you need to get your employer’s match. If you don’t, you’re leaving free money on the table.

* Play catch up. If you’re age 50 or older, take advantage of the catch-up provision which lets you contribute an additional $5,500 into your plan each year.

* Increase your contribution each year. Even by increasing your contribution by 1%, this amount will add up quickly. Also consider bumping up your contribution percentage each time you get a raise or a bonus.

* Don’t forget about 401(k)s at former employers. If you leave your job you have several paths you can take with your 401(k): Leave savings with your former employer, roll over your plan to a traditional or Roth IRA (individual retirement account), move savings to your new employer’s plan, or cash out and pay taxes. Each scenario will require research to determine what’s best for you. Cash out your plan only as a last resort.

* Don’t take early withdrawals. Experts advise not borrowing from your 401(k). Think about whether you’ll be able to contribute to your 401(k) while you’re paying back your loan. If you can’t, this is derailing your savings even more. If you leave your job, you’re responsible for paying back the loan, usually within 60 days. If you can’t pay it back you’ll be subject to taxes and penalties. A better alternate for borrowing money is getting a low-interest loan from your credit union.

* If you delay retirement, keep your 401(k). Once you turn 70 1/2 you have to start withdrawing a minimum distribution. If you’re still working you don’t have to take the distribution until you actually retire.

* Aim to save 10% to 13% of your gross pay. This includes your employer match if you get one. If you’re already saving enough in your employer’s retirement plan to get the company match, consider opening a traditional or Roth IRA at US Community Credit Union as well.