You probably know by now that you can build a sizable pool of savings if you take part in your company’s 401(k) retirement plan. And guess what? Enrolling in a 401(k) is usually pretty easy. But just because you are not required to do much, does not mean you should not take it seriously. This, after all, is all about your nest egg and your future.
Whether you are new a new or existing employee, you can sign up for the 401(k) plan during a period called open enrollment. Each company decides when you can enroll in the plan and your employer will know those details.
Here is what you can expect:
1. Notification of Open Enrollment
Your employer should alert you to open enrollment a few weeks ahead of time, usually in the form of a company-wide email, and most companies will also send an enrollment package to your home.
2. Salary Deferment
It is up to you to decide how much you want to invest.
For 2020, you can contribute the lesser of $19,500 or 100% of your wages. There is a $6,500 catch up provision for people 50 and over in 2020 as well.
3. Employer Rules
Many firms match your contributions up to a certain percent of your salary. The limit on matching is defined by the IRS maximum contribution limit of $55,000, counting both employer and employee deposits combined.
4. Investment Elections
The final step, and perhaps the most important, involves your investment elections. An automatic investment plan from your paycheck to a well-balanced portfolio model
in your 401(k) is a critical step to your path to financial independence. Once you are up and running, you might want to set an annual calendar reminder to reassess your contribution level. Do what you can to increase your contributions each year,
even if it is just a little bit.
By far, the most impactful thing you can do when planning for retirement is to understand your options and take action with what’s best for you. Talk with your company’s 401(k) HR Manager as soon as you can and we believe our Shelton 401(k) Educational Videos, may help you make good choices and stay on a good retirement track.