Can we jump right into some #RealTalk? …Of course we can.
Not too long ago (like, a week ago TBH), I had absolutely no friggin’ clue what 401k benefits were besides knowing it was something that “older people” cared a heckuvah whole lot about.
And now I know why they care.
First off, back it up and assume you’re like me…What is a 401k??? Here’s the (easy) scoop:
401k benefits (or a 401(k) if ya like parantheses 😉 ) are a retirement savings plan that is somehow #sponsored by your employer. Essentially, it lets you invest a piece of your regular paycheck before taxes are taken out, so that you’re not taxed on that income until the money is eventually withdrawn for use. And a 401k isn’t your only option! Depending on what industry/field you’re in, you’ll have different types of similar plans that essentially do the same thing: help you bank moolah as you go for the day you’re donezo. Public school employees and other tax-exempt workers might have a 403(b), while certain government employees might have a 457. First thing’s first…find out what you have based on your job and/or field.
I’m one of the unluckier ducks that has no chance of a 401(k), seeing as I’m my own boss. A total blessing and a curse in one amiright??
401(k) or bust, here are 10 tips to start saving now, to go from “But what is a 401(k)?” to retiring a millionaire.
10 TIPS TO UNDERSTAND YOUR 401K BENEFITS
- Automate your savings. Whether you have a 401(k) or not, the easiest way to make saving and investing a no brainer process is to put it on autopilot. At a typical 9-to-5, your built-in retirement plan does the dirty work for ya. If you’re an entrepreneur or work somewhere where you have to get craftier with your options, consider making your chosen investment plan automated for the same sorta effect. It doesn’t have to be big! There are apps out there (one is called Acorns) that help you start small by rounding up on every purchase you make to the nearest dollar, investing the difference between your purchase order and that next highest round dollar amount. So, $0.35 would be invested every time you buy a $4.65 grande caramel macchiato at Starbucks, bringing you to $5. You get the idea. 😉
- Bank things like pay increases and tax refunds. I get it, I get it…sometimes when you’re #blessed with some extra cash, you wanna take it straight to the mall – not straight to the bank. But if it meant you were that much closer to retiring a millionaire, would that change how you spent your tax refund?
- If your company has a matching plan for your 401(k)...take it. This means that for every piece o’ yo’ paycheck that is getting taken out to go to your retirement…they match that and contribute the same amount on their own dime. THIS IS AWESOME. You’ll get twice as far by the time you’re ready to retire.
- Check out these tips for investing while in debt from Allstate – they center around making small, significant changes to redirect cash where it’ll matter most.
- Budget yo’self NOW. Don’t wait until you HAVE to have a budget to make a budget. Actively outline all of your expenses, categorized into the ones you’ve gotta pay no matter what (lookin’ at you mortgage), to the ones you put in there because you want them there, but don’t necessarily need if the AC broke or the roof caved in (like Netflix…cos there would be zero chill if the roof actually came in).
- Make small sacrifices. This goes right offa the last point, but be willing to let go of non-necessities. Can you opt to DIY your weekly mani instead of hitting up the salon? I know, I know, this one’s serious…but daily Starbucks? Can we cut down to once a week as a treat?
- Take advantage of any/all opportunities to save more or invest, and opps to get a tax break for doing so. Tax breaks are the real deal, and they’re hella helpful.
- Get a side hustle. Side hustles are fabulous ways to pay some extra bills if need be, and to get ahead on investing. Even if you focused on solely making enough to invest $600/month…you could do that! Put those special skills to good use.
- Review monthly bills. This one time, I was going through my credit card statement and found all of these random, seemingly small $20 monthly charges from iTunes. Add up a few iTunes subscription charges tho, and WHAT DO YOU KNOW, it’s more than pennies. Do you reaaaaally need that Hulu subscription? Or that beauty box, or magazine charge? If you find yourself subscribed to things that you don’t *really* need/use/lovelovelove every single time it shows up on yo’ doorstep, it might be time to nix ’em to cut down the monthly bills and help you get closer to retiring a millionaire.
- Start YOUNG. The earlier you start, the more you earn. Before you write it off as “I have student loans! And you want me to INVEST what little money I’m taking home? HA!” remember this: if you’re investing, tax liability goes down, meaning student loan payments go down if you’re on a repayment plan. Yup. Investing and saving now could actually help you now AND later. Bless up. This Retirement Calculator from Allstate will work wonders in helping you figure out some numbers as you start!
(And Allstate has even more strategies here (their blog is SO FULL of resources, y’all!).)
No matter how we all feel about politics or the economy or foreign affairs, I guarantee we can all agree on this: We’d all like to retire at some point.
If you’re sitting there shaking your head saying, “But E, I lovelovelove my job – I could work until I croak!“, then joke’s on you…chances are you’ll burn out at some point or another. I mean, what fun is that?! We don’t live to work – we work to live. As much as we’re about “the hustle” and the gogogo of life right this second, that doesn’t mean you’re going to want to (or be able to) keep that up for all eternity. There’s a difference between saving money to have a few extra bucks in the bank, versus saving money to one day quit your job altogether and not work with any sort of regular, comparable income coming into your household.
…so have you thought about retirement yet?????
We’re young! We’re healthy! We’ve got years of solid work ahead of us before the “R” word comes into play? Right?
Cos here’s the thing.
The earlier you start, the more you earn.
Bless my hubby who’s a whiz with Excel and a nerd with investing. He went ahead and did some number crunching to figure out by when we could be millionaires if we start rigorously investing. I ain’t complainin’. 😉 So, some perspective. We’re 7 years apart in age. All other factors being the same (how much to invest a month, interest rate, etc), here’s the difference in what I would have coming out at 62 years old, versus him, if we both starting investing $600/month right this very second.
Yup, that says that if I put away $600 a month now, assuming conservative interest rate and a big fat goose egg zero already saved…I could retire at 62 a millionaire simply because I’m starting young. Collectively, I would’ve put in around $280,000 over all of the years…and compound interest would’ve come in to save the day, adding over $825,000 just by simply doin’ its thaaaaang behind the scenes.
Alternatively, J’s is beneath mine…he would have that much less than me, simply because he’d be starting later in the game. Mind you, that’s a $413,416 difference.
How crazy is that?!?
And I dunno about you, but I could think of quiiiiite a few things I could get with $413,416. Namely, a whooooole lotta shoes. And maybe a boat? TBH, I don’t even KNOW what I would do with a spare $400K. I’m sure I’d figure it out and be a darn good millionaire. But until then, time to break open the piggy bank and take it to the big boy bank. 😉
What are you doing now to save for retirement? Have you thought about 401k benefits?
Have ya thought about it yet?? Do you have 401k benefits? I’m still new to the game, so if you have some expert tips + tricks, throw ’em my way, wouldja?
In the meantime, this girl is rounding up the change in the house and getting started on that $600. I’ve got a million to hit. 😉
This 401k benefits post was written as part of the Allstate Influencer Program and sponsored by Allstate. As always, all thoughts and opinions presented are entirely my own. As the nation’s largest publicly held personal lines insurer, Allstate is dedicated not only to protecting what matters most–but to guiding people to live the Good Life, every day. Thank you for supporting the brands that support Coming Up Roses!