April Monetary Challenge: Finally Unlock 401 (K)
Learning to be good with money isn’t just about saving it. You want to grow it too. If you have employer-sponsored 401 (k) and they match your savings, the challenge for this month is to finally grab hold of it .
How a 401 (k) match works
There are a few caveats here and we’ll cover them, but generally speaking employer 401 (k) match is very important . Here’s how it works: A common scenario is a 50% match of your contribution (savings), up to 6% of your gross salary. That way, for every dollar saved, your employer will save 50 cents. If your salary is, say, $ 50,000, the upper limit is $ 1,500 per year. (This Calcxml 401 compliance calculator will give you a more accurate representation based on the terms of your own employer.)
That’s a lot of money! And that’s why most money experts say you definitely need to open a 401 (k) if your employer offers a match. That said, many of the 401 (k )’s are notoriously crappy , so let’s get down to the caveats.
Why 401 (k) isn’t everything
Many 401 (k) ones come with high fees and limited investment options. Be sure to check out the details of your employer sponsored account (we’ve shown you how to do this here ). However, a match is almost always a good idea because it’s like free money. So it pays to accumulate enough in your 401 (k) to get that match. However, if you still have money left after that and want to save it, consider opening an Individual Retirement Account (IRA).
No 401 (k)? Open IRA
Opening an IRA is also a good idea if you don’t have an employer that offers 401 (k), but you still want to take the challenge and put off retirement. We’ve written a complete guide on how to do this here .
The goal of this challenge is simply to get you to start saving for the future. Many people neglect this because they can hardly afford to pay for their lives right now, much less in the future. However, many people neglect this because it is quite difficult to get started. If you’ve long wanted to save up for retirement, this month we urge you to take a leap forward.
Of course, we also understand that not everyone can take part in this trial. You may still be working to get out of debt or break the paycheck to paycheck cycle. It’s only April – we have even more tasks in the works for other types of financial goals.
However, if you are playing, turn off the sound below! We will have publications and articles to help keep you in check for a month. And at the end of April we will all check our progress. Good luck!