Saving $1 million sounds like an impossible task, but there are realistic ways to achieve this dream. Lucky for many Americans, their trusty 401k has the tools to help propel them to millionaire status.
Read on to learn the strategies to get the most out of your 401k and grow your account to $1 million.
Tip No. 1: Max Out 401k Contributions
Make sure you’re taking full advantage of your 401k’s earning potential. Contribute as much as you’re allowed to, which is currently capped at $18,500 in pre-tax dollars.
Then see what your employer offers as far as after-tax contributions go, and try to save as much as you can.
Tip No. 2: Start Saving as Soon as Possible
It’s never too early to start building that nest egg. Even if you’re a fresh-faced teen who just got her first paycheck, get in the habit of squirreling some of that away for a rainy day far, far in the future.
If you have missed the jump on early savings, perhaps use it as a lesson — and be sure to teach your children the power of compounding interest over time.
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Tip No. 3: Take Advantage of Matched Employer Contributions
If your employer has a matching program, recognize what they’re doing: For every dollar you put in, they’re giving you free money to help it grow faster. Have you ever turned down free money in any other scenario? If the answer is no, then make sure you’re contributing enough to get the contributor match.
For example, if you earn a salary of $40,000 and contribute just 3 percent of your pay (or $1,200), but your workplace gives a 50 percent match up to 6 percent of your salary, you’re missing out on $600 in free cash.
Tip No. 4: Watch Out for 401k Fees
Beware of the fine print. Not all retirement plans are created equal — and many of them charge fees to cover the administration costs associated with managing the investments.
Much like interest, fees can compound too, but that means bad news for your bottom line. Be sure to be aware of the fees on your accounts — and if they’re high, don’t be afraid to jump ship to a different contribution method once you max out your employer match benefits.
Click through to learn how to master your 401k.