How to Build Your 401(k) - dummies

How to Build Your 401(k)

By Ted Benna, Brenda Watson Newmann

Part of 401(k)s For Dummies Cheat Sheet

You want the money in your 401(k) retirement account to grow; so, to build a comfortable nest egg, you need a smart strategy. Use the tips in the following list to guide you as you make decisions about your 401(k):

  • Save in a tax-deferred retirement account as soon as you can, to get more bang for your investment buck.

  • Start by saving just 1 percent of your pay if that’s all you can afford.

  • Save for retirement even if you think it’s too late. It’s never too late.

  • Save at least the amount your employer matches, otherwise you’re throwing money away.

  • Aim to put away 10 percent of your income for retirement each year; increase your savings rate each time you get a raise.

  • Aim to build a nest egg that’s at least 10 times your annual pay when you retire.

  • Remember that Social Security won’t be enough to finance your retirement. Even with a traditional company pension, you’ll likely have a gap to fill with your own savings.