Understanding Your First 401(k): Tips to Maximize Employer Benefits

Starting a new job often comes with a flood of paperwork, and your 401(k) plan might feel like just another form to fill out. But this benefit is a powerful tool to help plan your financial future. In this post, we’ll explain how to make the most of your 401(k), including strategies for maximizing employer matches and seeking to grow your retirement savings.

A 401(k) is a retirement savings plan offered by many employers, allowing employees to contribute a portion of their income to a tax-advantaged account designed for long-term retirement savings. Contributions grow tax-deferred, meaning you don’t pay taxes on the investment earnings until you withdraw funds in retirement, potentially reducing your taxable income now. Many employers also offer matching contributions, effectively providing free money to boost your savings. A 401(k) offers a range of investment options, such as mutual funds, target-date funds, and stocks, allowing you to tailor your strategy based on your financial goals and risk tolerance.

1. Maximize Employer Contributions

If your employer offers a match, contribute at least enough to take full advantage—it’s essentially free money.

2. Choose the Right Investment Options

Understand the funds available and select a mix of investments that matches your goals and risk tolerance.

3. Increase Contributions Over Time

Start small, then aim to increase your contributions annually or whenever you get a raise.

Here’s how we helped a new Client 

I recently started working with a new client who just landed their first job out of college. Like most, they were overwhelmed by the 401(k) enrollment process and weren’t sure how much to contribute or which investment options to pick. Together, we reviewed their plan, discussed the importance of employer matching, and set an initial contribution rate to secure the full match. We also used our financial planning tool to project how these choices may impact their retirement savings. 

Are you new to 401(k)s or unsure if you’re making the most of yours? Our financial planning tool can help you assess your options. Schedule a meeting with us to create a personalized plan.