Invest in your future – The benefits of starting your 401K early
As early career professional’s retirement may seem like a long way away, don’t let that mentality hold you back! It is never too early to start planning for your future. Starting early and making regular contributions will put you in the best financial position possible when you are ready to retire. Many workplaces provide you with opportunities to invest in your company’s 401k plan, and often times provide match your contributions!
What is a 401K?
A 401K is a way for companies to help their employees start saving early for their retirement. When starting your 401K retirement savings plan, you can invest a percentage of your pre-taxed pay in a variety of different mutual funds to grow your savings. Taxes are not deducted from these investments until that money is withdrawn from your 401k. The best part about investing in a 401K plan is you have complete control over how your money is invested, so make sure to do some research and create a strategy prior to starting. Xerox provides employees with access to the BenefitsWeb to help you plan your investment strategy and easily set up your 401K.
Why should I start now?
There are several reasons why you should start your 401K as early as possible. By starting early, you can make savings apart of your monthly budget, and you will not miss the money you are investing. Additionally, investing in stocks and bonds takes time to see real growth, so the longer you have a 401K the more contributions and growth you will see. Lastly, as early career professionals you may have less debt and bills now, allowing you to contribute more than you will be able to down the road when you start paying for a house and/or kids.
What else do I need to know?
Start small and gradually increase contributions: Start small by investing what you can afford to live without in your current monthly budget. Try starting with contributions of 1-3% of your current salary, and as you get use to the reduction in your paycheck increase contributions as you see fit.
Look for funds with the lowest fees: The lower the fees, the more money you will see in your 401K. When reviewing which funds to invest in, it is best to avoid mutual funds that charge more than 1% a year. If you are unsure of which funds to invest in, it may be a good idea to split your investments among several funds to see which one sees the highest returns, you can always adjust how your contributions are invested.
Look but don’t touch: Your 401K is a long-term investment, so patience is a virtue. The stock market goes through regular fluctuations and as such you may see increases or decreases along the way. If you start to get worries that your investments are going in the wrong direction, reach out to representative through the BenefitsWeb portal for further advice.
Watch our on-demand webinar: Learning about 401K Options presented by Chris Reigle. Chris provides an overview of the 401K options available through Xerox and advice on how to get started on your 401k.