To start planning your retirement, you should first understand the basics. And for most employed Americans, this means your 401k.
What is 401k?
The 401k is a retirement saving and investment plan available in America, and most employers offer it.
Employees can contribute and invest money into funds of their choice. This is typically a mix of mutual funds, stocks, and bonds. You’ll receive tax breaks on the money you contribute. In addition, employers will match your contributions - that’s free!
You can contribute money through deductions to your paycheck. However, note that there’s a limit on how much you can contribute annually. As of 2022, that limit is $20,500.
Why is 401k important?
The 401k is a way to incentivize employees to save for retirement. But, if your employer doesn’t offer the 401k, don’t fret! There’s the Individual Retirement Account (IRA) that you can open.
There are, however, two essential things to remember.
First, start saving earlier.
The earlier you can start to contribute, the better. That means making a point to regularly set aside some money from each paycheck and putting that towards your retirement savings.
Keep an eye on your liabilities, like any debts or loans.
Second, track your wealth.
As mentioned earlier, keeping track of your liabilities is also essential. You don’t want to be paying off your debts after retiring, so make sure you keep an eye on any debts you may still owe.
Tracking your wealth is a great way to ensure you’ll be financially stable after retiring.
You can track your wealth for FREE using Cova - a digital asset tracker that helps you manage your assets and liabilities, share your portfolio with your advisors and lawyers, and assign a beneficiary if anything happens.