401K for Millennials: Planning Retirement with Confidence

Posted On: September 25, 2023

Many millennials believe it is too soon to start planning their retirement. Think again. It's easy to get caught up in other, more pertinent things in life, but planning your retirement — as early as possible — means you'll have more money for your later years. And the more you save now, the more comfortable your lifestyle will be.

Many retirement plans exist, from pensions to 401Ks to individual retirement plans. Today, we'll focus on the 401K, often the most common retirement plan employers offer.

A 401K plan builds wealth through payroll deductions. Additionally, a 401K grows with the power of compounding interest, making it an attractive way to save for retirement. The interest earned offers a way for your money to work harder for you instead of you working harder for your money. Many employers provide a matching incentive to help you save even more, and it's best to take advantage of these opportunities to maximize your savings.

Maximize Contributions for Long-Term Growth

The United States Census Bureau reports that just under 50% of millennials have a retirement account. Of those who do, nearly 35% have a 401K or similar retirement plan, which is great news! But your financial future might be at risk if you're not among those with a plan. However, there are some strategies you can start today to boost your savings for later.

Quick Start Strategies
  • Start early and save consistently
  • Increase your contributions over time
  • Automate your paycheck contributions
  • Take advantage of your employer's matching contributions
  • Monitor your investment performance to ensure you stay on track
Navigate Investment Options

Choosing an investment portfolio for your 401K might seem puzzling, but it doesn't have to be. Many 401K plans offered through your employer offer two ways to determine your portfolio. You can build it yourself with a more hands-on approach, giving you complete control over where your assets are allocated and the level of risk you prefer; this is best for those with investment experience. 

You can choose a pre-built portfolio based on your retirement date and the level of risk you're comfortable with. The plan automatically adjusts the mix of stocks and bonds over time. Using a pre-built portfolio is the most hands-free and effortless approach, and it works best for beginners.

How to Manage Your 401K During Career Changes

Life is full of twists and turns, including career changes. The great news, though, is that your 401K is portable. In other words, you can take it to your next job by rolling it over into an individual retirement account (IRA) or your new employer's plan. This allows you to keep your retirement savings intact and on track while avoiding the hefty early withdrawal penalties. 

Planning for Retirement and Beyond

Retirement is more than just the end of your working career; it's also about pursuing your dreams and goals and savoring a slower pace of life. Work with a financial advisor to craft a holistic plan that makes sense for you — one that reflects your objectives and comfort level with financial risk.

When you plan for retirement, you're building wealth and a better quality of life for your future self. And the sooner you start, the better off you'll be later.

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The Final Word

While planning for retirement might not be as exciting as planning your next vacation, it's an essential chapter in your life. Have you ever heard the adage, “If you fail to plan, then you plan to fail?” Saving for retirement is like that, too. However, failing to plan can leave you in a financial predicament later, with insufficient funds to cover the important things in life. 

Planning and saving sooner allows you ample opportunities for smart investing, adapting to change, and taking advantage of free money — employer contributions and compound interest. It also gives you something to look forward to later — a comfortable retirement, less financial stress, and truly enjoying your golden years. 

Avoid leaving your future self at financial risk. Take care of your future self by planning for your future.



Important Disclosures and Information

  • Extraco Banks is a Member FDIC