How much do you contribute to your retirement plan each year? If your answer wasn’t, “the maximum amount” then you’re missing out on several extremely important financial planning opportunities.
Earn a valuable tax benefit. Because contributions to qualified retirement accounts like a 401k are made on a pre-tax basis, your taxable income is lowered by the amount of your contributions. You can quite literally lower your income tax liability for the year; why not lower it as much as possible?
Time is the only thing you can’t get more of. The contributions you make to your retirement account will grow over time, based on the power of compounding interest. Accumulating more money in the account means earning more interest, over time your interest earns interest, and so on. The one thing that is not in infinite supply is time. You can’t go back in time and contribute more to your retirement account. So the best way to earn as much as possible via compounding interest is to contribute more now.
Reap the full matching contribution from your employer. Many employers offer matching contributions for retirement. Contributing the full amount will help you accumulate even more savings.
No one ever saved too much for retirement. Talk to current retirees, and you’ll likely meet more than a few who wish they had saved more for retirement. But you won’t find anyone who admits that they saved too much. That’s because it has never happened! If you max out retirement plan contributions now, you will definitely thank yourself in the future.
For 2022, the maximum allowable contribution to retirement accounts is $20,500, or $27,000 for those age 50 and older. Call us to discuss your current contributions, and we will further explain the benefits of maxing out.