Who doesn't want a raise? If you're a little confused as to what your companies 401(k) plan has to do with you getting a raise, you should find out what your company's 401(k) plan is. When you sign up for your company's 401(k) plan, you choose a percentage of your income that you want your company to put away into your retirement savings to build up your nest egg. The money you put away will not be taxed until you start pulling it out after retirement. The company will usually match your contribution 100% up to a certain percent of your income. For example, if your income is $50,000 a year and your company is offering to match your contributions up to 5%, you can choose to contribute 5% ($2,500) and your company will throw another $2,500 into your retirement. You just gave yourself a 5% raise. However, if you choose to contribute 8% ($4,000), your company will only match the first 5% ($2,500).
Let's create a scenario. Let's imagine you are currently 30-years-old and have no nest egg (retirement savings) at all with a $50k salary and your company matches your contributions 100% up to 5%. If you start investing in your company's 401(k) retirement plan now with 5% of your income, when you retire at age 65 you will have:
$633,217 at retirement!
image from http://www.401kcalculator.org/ |
If you are about to graduate from college and get your first full-time salary job, this is the perfect time to take advantage of your company's 401(k) plan. You are used to living with your part-time hourly job and you suddenly increase your annual income quite a bit. Invest in the plan immediately and get in the habit of making contributions. You will still be receiving more than you are accustomed to in your monthly paycheck. There are a lot of companies out there that have great 401(k) retirement plans. Just check out this list of top 5 employers with generous 401(k) matches on money.usnews.com. Just for fun, let's create another scenario with Clif Bar.
image from http://www.401kcalculator.org/ |
$2,109,362 at retirement!
Tell me, how awesome is that? Now go give yourself a raise.