Welcome to adulthood. You have bills to pay, possibly student debt, basic needs, and we’ll even throw in child expenses for fun. On top of this you could be attempting to contribute to your retirement plan as much as possible. When you turn 59½, we’re assuming you want your retirement account to be beefed up via 401(k) contributions. You’re already aware that safari vacation on your dream board won’t pay for itself. 

This is where many plan holders feel pulled in opposite directions; opt for Plain Jane savings, or let retirement contributions compound on their own. Even the hardest working person meets financial obstacles. All the while they are expected to contribute to retirement. 

It’s becoming clearer retirement plan holders are opting to save over contributing. This is a fine tactic for the average American. However, it comes with a few hitches such as missing out on employer matches and skipping the rebalance process.

Proper Optimization for Small 401(k) Contributions

Let’s face it, investing can be tricky business. Funding a retirement account can make you feel like a turtle inching its way to a finish line. However, retirement contributions should be as vexing as reading a children’s book.

It’s best not to overcomplicate things. This is where we cannot stress enough about using tools to diversify your account and remembering to rebalance when necessary. 

Even the smallest of contributions should be held to their highest regard. Many 401(k) plan providers (your employer) often match your contributions and it’s considered important to save enough to meet that match. It’s a good rule of thumb to  never leave free money sitting around that could otherwise compound over time. 

Your savings account is equally as important as your retirement account. The difference is your investments in your retirement account are meant to grow and increase. 401(k) investments tend to take a life of their own with the goal of  following the trajectory of a positive market. 

A savings account grows when you choose it should and might offer a small interest rate, but they tend to lack the objective for growth like that of a retirement account. Did you know 401(k) optimization tools are available for you to implement and communicate how your investments should be allocated and rebalanced? Can your savings account do that? 

Make a Financial Plan for Yourself 

If you treat your 401(k) contributions like splatter paint on a Jackson Pollock canvas, then that is your prerogative. Going all in is considered an aggressive tactic, and it is meant for investors who lean toward the younger side and have extra time to weather volatility as well as bear markets. 

If your financial plan seems to be pointing towards a later retirement, then your contributions may not need to be as strict. When you’re 59½ you will be able to withdraw without penalty anyway. 

There’s More to Earning than one 401(k) Retirement Account 

Again, you may have bills to pay. You may also have debt. You might have little Susie’s college fund to think about as well. However, in our opinion, a 401(k) plan shouldn’t hold you back from considering various types of investments as well as alternate ways to earn and save. 

You could also consider a few side hustles such as real estate involvement, or a side business. The world will never stop needing places to sleep or knitted scarves. All in all, everyone’s formula is different.

If you are the type to throw money into your savings account before your retirement account, we recommend you keep your long-term financial goals in mind. Optimizing and rebalancing could potentially put you on that dream vacation a littler sooner than you might think. 

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