How To Get Rich 401(k) Style

I know that we have talked about this topic before, but when you see the statistics (current 401(k) stats) it makes me want to talk about it some more. When an employer offers you a 401(k) that matches your contribution you need to take the offer. A lot of people think that if you’re in debt you should stop contributing; which in my book is a lie unless your interest rate is over 30%.

Example of why you should contribute:

My former employer offered a 100% match on 4% of my income in their common stock if I contributed 6% of my pay. *Let’s just make the numbers easy by saying I make $1000.0 every two weeks* When my employer takes out 6% of my pay (before taxes) which is $60.0 they will match $40.0 in their common stock. Instead of saving $60.0, I earned a $100.0. That is an immediate ~67% return on your money! Can you believe people pass up this offer?

If your employer only offers the match with their company stock, I recommend allocating your contribution to other mutual funds inside of your 401(k) for diversification purposes. Diversification just means not putting all your eggs in one basket. The reason why I don’t suggest putting all your money in your company’s stock can be explained by looking at Enron, Delta, WorldCom, and Tyco.

Here is a great calculator that displays how easy it is to get rich having a 401(k) as a retirement savings vehicle. Do not be part of the 30% of American workers not contributing to their employer matching 401(k) plans. So be rich the easy way. Contribute today!