Why not put your bonus and pay raise this year into your 401(k) plan?
Many people forget about or ignore retirement planning when they get a salary increase, raise or taxable bonus—and this oversight can cost tens or hundreds of thousands of dollars down the road.
You’ve already decided how much of your paycheck you’re going to put into your 401(k) plan each pay period. The plan also features an automatic increase program in which you decide how much money you want to save each month and on what day.
Let’s say you’re expecting a 2 percent raise each year and you want to put all of it into your 401(k). You can set the automatic program to increase your current savings rate by 2 percent each year at the time of that raise.
Reaching savings goals
Automatic increases make reaching your savings goal much easier by helping boost your savings slowly. You gain time to plan for the changes in your income and adjust your lifestyle gradually because you’re not going to have that money to spend.
Automatic increases give you one less thing to think about and removes the possibility that you simply won’t get around to it.
The increases aren’t locked in forever. You can opt out of an automatic increase m at any time, but very few people do.
If you would like to set up this feature, log in to 401k.com. On the menu, go to the Home area and then View Summary.
On the Contributions tab, click on Annual Increase program.
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