A Millennials Guide to 401(k) CareerMetis.com

A Millennial’s Guide to 401(k) Original Image Source â€" Depositphotos.comRetirement comes once, so preparing for it as best as you can is incredibly important. But, preparing for retirement is often much easier said than done. For millennials, this is especially true; in 2018 the average millennial had $25,500 in their 401A 401First and foremost, not enrolling in your company’s 401Furthermore, many employers have a waiting period, meaning you have to be employed with them for a set amount of months before you can set up and make contributions to your 401Sometimes contributing a certain amount just isn’t in the cards. If money is tight and you can only contribute a small percentage, that’s okay.Even so, it’s important to regularly check your budget and determine if upping your contribution amount is doable or not. If you can afford to increase your percentage of contribution to your account, do it as soon as possible. Again, this can amount to thousands and thousands of dollars over time.4) Ignoring the Po tential of a RothAlmost 100% of the time, 4015) Cashing Out Your 401Millennials may not have Social Security to rely on at retirement like previous generations, so avoid cashing out your 401If your employer doesn’t offer a 401(k), or you simply want to supplement your 401(k) in other ways, you’re in luck. There are a number of alternatives and supplemental accounts that can help you build a healthy retirement now.a) Traditional IRAA traditional individual retirement account (IRA) operates a lot like a 401(k) but without any employer involvement. You make contributions, your taxable income is reduced, and your qualified withdrawals are taxed at retirement.Like a 401(k), there’s a contribution limitto be aware of, so make sure you’re always staying within the limit to avoid excess contribution penalties. You’ll also have to make minimum withdrawals from your account when you reach 70 1/2. This means you can’t leave your entire IRA as a nest egg for your loved ones.Just lik e a 401(k), if you have a lot of earning potential with your job or skillset, a traditional IRA may not make as much sense for you as a Roth IRA.b) Roth IRAA Roth IRA operates like its 401(k) counterpart. With a Roth IRA, you can make post-tax contributions, build a nest egg, and then enjoy tax-free withdrawals when you retire.It’s worth noting that you’re never forced to make withdrawals from a Roth account, so you can leave this account to your loved ones long after you’re gone as well.If you don’t think you’re going to be in a substantially higher tax bracket near retirement, a Roth account may not make sense for you.c) Brokerage AccountsBrokerage accounts can be a wise way to invest and build a retirement, but they require varying levels of investment knowledge depending on the route you want to take.With a brokerage account, you invest your funds through a brokerage firm, which then takes your funds and invests them. This can be a great way to build a diverse portfoli o, as they can invest your funds in real estate, stocks, and so on.If you have a lot of finance and investment knowledge, you can use micro-investing appsor simply fly solo and invest funds on your own. If you’re less familiar or want to play it a little safer, many brokerage firms will offer their services for a fee and simply ask you about your financial goals, and then invest for you.d) Index FundsPlaying the stock market can be risky, stressful, and difficult for the layman. Index funds allow you to reap the benefits of the stock market without all the risk.When you invest in an index fund, you invest in a collection of stocks that make up an entire market index. For example, if you invest in the Standard Poor’s 500 Index, you invest in the 500 companies that make up that index. This reduces the risk that comes with investing in a single company and increases your chances of having stable growth over the course of many years.Another perk of index funds is that they generall y don’t have many fees associated with them, such as the handling fees that can come with brokerage accounts. This allows your money to go further, which again, can translate to thousands over the lifetime of a retirement account.Build Your Best FutureRetirement may feel like it’s a long way off right now, but it will be here before you know it. Account growth takes time, so getting your retirement account off the ground is more important now than ever.It’s better to invest something rather than nothing, so even if you can only afford a small amount, get your 401(k) or other account started as soon as possible. You can even consider earning additional income with a part-time weekend job to compensate for adding more into your 401(k). Over the course of many years, even the smallest sums can grow into a substantial amount that helps you live your most comfortable life after retiring.