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A 401(k) plan may not be your only choice when it comes to saving for retirement, but if your employer offers one, it pays to take advantage of it. Here are a few ways to make the most of your 401(k) so that it serves you well throughout your senior years.
1. Put in enough money to claim your full employer match
Most employers that offer a 401(k) plan also match employee contributions to different degrees. If you fail to take advantage of that match, you’re effectively giving up free money, so instead, figure out how much money you need to contribute from your own earnings to snag your match in full. For example, if your employer will match you dollar for dollar for up to 5% of your salary, and you earn $60,000 a year, that means putting in $3,000 of your own money will give you another $3,000 — the most you can get — in return.
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And remember, those matching contributions can add up over time. Say you score an extra $3,000 in your 401(k) every year for 30 years. If your investments in that plan generate an average annual 7% return, your matching dollars alone will give you an additional $283,000 …
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