Relationships #FutureProof: Contribute to Your 401k… Right Now Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Mint.com Published Sep 12, 2018 - [Updated Apr 27, 2021] 5 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. The future always seems like a long ways away. It is the future after all. But once you start saying “oh I’ll take care of that later,” later will creep up on you faster than you think! One area that most of us constantly ignore is saving for our financial future—namely retirement. Understandable, given that your current finances can be so overwhelming, it makes sense that your “later” finances often take a back seat. But before you know it, your “oh I’ll take care of that later” task will quickly turn into “oh snap why didn’t I do that” regret. According to a recent study from the National Institute of Retirement Security a whopping 66% of millennials have nothing saved for retirement. That’s right a big huge zero. On top of that, only 5% are on track to save the right amount before they reach retirement age. These statistics are terrifying because our generation is expected to have a longer life expectancy than previous generations. Meaning we all better pull it together otherwise, we won’t be able to afford to retire! But why is it that millennials are so drastically under-prepared? The Society for Human Resources Management reports that millennials are simply not educated on employer retirement benefits like 401(k)s. Most have no idea what types of retirement benefits are provided, how they work, how they can enroll and why they should. If you legit don’t know what a 401(k) is, don’t worry you are not alone. But before you reach 80 and realize “oh snap” I should have saved some money, take a few minutes to learn how to now. Trust me: you won’t need a DeLorean to see the impact of your good decisions later on. Grab a pen and paper, friends. It’s time to #FututeProof our finances and get up to speed on all things 401(k). 401 Mm(k) What? Spoiler alert: 401(k)s are actually not as confusing as everyone has made them out to be. They’re a really great benefit that most employers offer to employees to help you save for retirement. Essentially, it’s a financial plan that allows you to take a portion of your salary each month and put it into a savings account on a post-tax/pre-tax basis. The best part? Most employers offer matching incentives and profit sharing plans to help you increase the amount saved. Before you enroll, remember that the money invested in the plan comes directly out of your paycheck. So if you have all your finances mapped down to the cent, you might want to rework your budget before you opt into the plan and include how much you want to contribute. A Relationship That Truly Benefits You The 401(k) is the most popular employer-provided retirement plan for a reason — it has a number of great benefits it provides. If your employer provides a match program, make sure you take advantage of this *basically* free money (cha-ching!). How it works is everytime you contribute money, your employer will contribute money too. Now that’s a great incentive to actually start saving, isn’t it? To make the most of this benefit, always try to contribute the amount needed to get a maximum match. For example: if your company says they will match 50% of your contribution, up to 5% of your salary, you will have to put in the 5% to get the highest amount of “free” money. Of course, match program rules vary, so check in with HR or brush the dust off of your employee handbook to find out the specific rules and requirements to claim this benefit where you work. Some companies will offer a higher percentage match based on years of service, so find out where you stand and start calculating how you can make enough to treat yo [future] self. Don’t Forget Your Nest Egg Now realistically, most people don’t stay at the same job forever, so what happens to your 401(k) when you decide to move to another company? Don’t just leave it behind (yes you can do that). If your new job accepts rollovers, take the amount you’ve saved with you and invest it in your new 401(k) or put the money into an individual retirement account. A word of caution — try to avoid cashing out your plan. If you do, you’ll have to pay a 10% federal tax penalty. Another great benefit of this plan is you can keep contributing to the account for as long as you are working. Some retirement programs will cut you off at a certain age, but if you’re still employed at 80 you still qualify. Additionally, investing in your 401(k) lowers your taxable income. Not only do you not have to pay taxes on the money you elect to save, you are also reducing the amount of money you will have to pay taxes on come tax season. Can you say “win-win!?” No 401(k) No Problem If your employer doesn’t offer a 401(k) plan or you’re looking for another option, there is another player in the retirement savings game—the IRA. An individual retirement account, allows individuals to earn funds for retirement without the support of an employer. Wondering which acronym is right for you? Revisit your plans and goals and decide from there. Convinced Yet? By now you should realize that it is a really good thing to utilize your 401(k). But here’s the big question: should you still contribute if you have a large amount of debt? According to Bankrate, if the interest rate on your debt is higher than the interest on what you are saving, it makes more fiscal sense to pay off your debt first. However, that’s not the case for everyone. Each person’s financial situation is unique. Some people would feel more comfortable having a nest egg to fall back on before paying off their debt. Others would rather be debt free first. It all just depends on your current debt scenario! The overall moral of the story — find out where you stand, make plans, start investing in yourself and do it now! Previous Post 31 Legit Ways to Make Quick Money in a Day Next Post What Is Discretionary Income and How to Calculate Yours Written by Mint.com More from Mint.com Browse Related Articles Investing 101 The Pitfalls of Borrowing From Your 401(k) Financial Planning Traditional IRA versus 401k: Choosing The Right Retirem… Financial Planning How to Max Out Your 401k Contributions Retirement 101 401k Early Withdrawal: What to Know Before You Cash Out Relationships The Price You Pay When You Ignore Your Finances Retirement 101 Chapter 06: Investing in an IRA vs. 401k Financial Planning Should I Cash Out My 401k to Pay Off Debt? Investing 101 An Introduction to the 401(k) Saving 101 5 Budgeting Tips for Singles Financial Planning What’s the Maximum 401k Contribution Limit in 2022?