If you give me $13,500, I'll give you $22,500 in return. Do I have your attention?
What if I offered you this deal every year from now until the day you retire? What if you don't even need to pay ME $13,500? You just need to pay yourself $13,500, and it will magically turn into $22,500?
No-brainer, right? Get $22,500 and all you need to do is find $13,500 to save.
What's the catch? There is no catch. This isn't a scam. This is real life stuff written into law.
What is this magic money trick?
Your 401(k) plan.
You didn't know your 401k did magic tricks, did you? But it does. Here's how:
(Hopefully) your employer matches your contributions.
You don't pay taxes on money you put into your 401k (until, much, much later)
Employer matches are different for each company. But most companies match up to 4.5% on your income.* So if you make $100,000, they will throw in $4500.
The catch is they only throw in money if you do. If you don't contribute $4500, neither are they.
How do you get this free money? Just save the percentage of your salary that they match.
If your company "matches up to the first 4.5%", then you should at least save 4.5%.*
You put in $4,500 and it magically turns into $9,000!* What's not to like?
But what if you're company doesn't match? Whomp whomp.
Is it still worth saving money in your 401k?
YES. YES YES and YES!*
And I'll show you why next week….
*As usual I'm simplifying the details to illustrate the point. The specifics of your 401k plan, how much you contribute and all other detail of your financial situation should be discussed with your financial planner before making any decisions.