Opening a 401k or 403b is easy enough, but optimally managing it can be quite difficult. Use these strategies to help ensure that your 401k or 403b is being maximally employed.
1.) If your company has a match, defer enough salary to reach the full match.
This sounds overly simple, but far too often “free” money is left on the table from under contributing. If you start your 401k or 403b plan in the middle of year, you can still get the full match by contributing the correct amount.
2.) Just because you can defer more money than the match doesn’t mean that you should.
In most cases, the next $5,000 ($6,000 if you are 50+) of retirement savings above the match should be placed into a Roth or IRA instead of your 401k or 403b. Roth’s and IRA’s offer you unlimited investment choices, allowing you to create a better portfolio.
3.) If you are maxing out your Roth or IRA, further fund your 401k or 403b.
You can save up to $16,500 ($21,500 if you are 50+) a year in a 401k or 403b. If you are able to save extra dollars, defer up to the max on your 401k or 403b.