How To Make the Most Out of Your Retirement Account

Rules and regulations regarding retirement accounts often use technical financial terms and may seem daunting. Check out this helpful list of ways to make the most out of your retirement account, from diversifying your portfolio to understanding contribution limits.

Avoid Cashing Out Early

Whenever you switch jobs (and most Americans will do so several times before retirement), you’ll have the opportunity to withdraw money from your 401(k) account and enjoy a sizable check.

While this is a tempting proposition, it can result in early withdrawal penalties and hundreds, if not thousands, of dollars in lost interest. Your best bet when switching jobs is to transfer your 401(k) by rolling it over to an IRA or the new employer’s 401(k) plan.

Diversify Your Portfolio

This is a tip almost everyone gives, but it’s essential to remember it. Investing can be very dangerous if you put all your eggs in the same basket—people who invested solely in real estate had a massive scare during the housing crash of 2008. To counteract market turbulence, make sure your assets vary, from stocks to bonds to real estate.

Don’t Neglect Employer Matching Opportunities

People with 401(k) plans enjoy an “employer match” feature, which means your employer will contribute as much money as you do (or a percentage of it) to your plan, up to a certain percentage of the employee’s pay. This can dramatically increase your savings without much work on your part, so take advantage of this immediately!

Know Your Contribution Limits

Contribution limits are changing in 2022, so if you want to maximize your retirement savings, it’s essential to figure out how much you’re allowed to save annually. Once you know the number, you can divide it by the number of pay periods at your job and determine how much you need to set aside to save the most money possible.

Don’t forget about catch-up contributions if you’re 50 or older—this allows you to save extra money as you near retirement.

Now that you understand how to make the most out of your retirement account, enjoy plenty of comfort once you leave the workforce.