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The Friday after Labor Day is National 401(k) Day! A 401(k) is a retirement savings plan that is typically sponsored by your employer. If your employer does not offer an employer-sponsored 401(k) plan, you can start a CalSAVERS account for free.
Benefits Of Starting a 401(k)
- Compound Interest Helps Your Money Grow Faster
- Compound interest is the concept that the money you save will grow exponentially over the years, even if you contribute the same amount every month.
- See how much you can save using this retirement calculator.
- Uncertainty with Social Security
- While Social Security is helpful, it is not meant to be your entire income when you retire. Generally, Social Security will cover less than half of your pre-retirement income. It can be difficult to get by in your retirement years solely on Social Security payments.
- Retire with Confidence
- With the increased cost of living, it may be difficult to survive solely on Social Security income. Having additional money saved will allow you to cover unexpected expenses and keep up with inflation.
- Having stable retirement income will allow you to live more independently and will allow you to live a lifestyle similar to when you were working.
- Match from Your Employer
- Many employers offer a 401(k) match. A match means that, if you contribute to your company’s 401(k), your employer will also contribute money into your retirement account each month.
What If You Can’t Afford to Save Towards Retirement?
The reality is, most people who aren’t saving for retirement want to but can’t afford to. When you’re living paycheck to paycheck, it can be difficult to find additional funds to put towards your retirement. Here are a few ideas of ways you might be able to save for retirement:
- Create a budget. Getting a hold of your current finances is the first step in understanding where your money is going every month. Create your budget using our budget worksheet.
- Invest your tax refund. If you aren’t able to put money towards your retirement account every month, use one-time funds like your tax refund to start saving. Learn how to save money and file your taxes with United Ways of California.
- Save your bonus paycheck. If you are paid biweekly, you will have two extra paychecks during the course of the year. Put those extra paychecks towards your retirement.
- Start small. Save what you can, even if it’s only $50 a month. With compound interest, your money will grow faster in a retirement account than it would in a traditional savings account.
Ready to Get Started?