What is a 401(k)?

In today’s society, it is very important that we educate ourselves on how to manage our finances.  I was shocked when I found out that some people had no clue on how to access and login to their 401(k) 🤔.  It appears some people think that a 401(k) is this magical money-making machine that grows significantly by just leaving it and hoping for the best. You don’t have to be a financial advisor or guru to start learning how to manage your finances.  If you have the willingness to want to learn, you can do it trust me. 

I put together a little walk-through guide on how to check your current 401(k) performance and how to re balance your account to increase your overall return rate.  Please note that this guide was created using screenshots from my Fidelity account since this is who my employer uses but I am sure the process should be similar.   If you have any questions, I would always recommend calling or reviewing the FAQ section on the website of your 401(k)-retirement plan.

A 401(k) is retirement plan is offered by your employer.  Unfortunately, not all employers offer a 401(k)-retirement plan so you will need to verify with the human resource department.  If your employer offers a 401(k) plan, I would suggest participating sooner than later.  There are several reasons why it is a no brainier and I will list a few below:

  1. 401(k) offer huge tax advantages.  Your contribution comes out of your paycheck before income taxes are deducted.  The maximum contribution amount will be based on the plan offered by your employer.
  1. Free money.  Your employer will match some, or all, of your contribution.  That is money on top of money being saved.  The contribution limit for 2023 is $22,500 if you’re under age 50 (up from $20,500 in 2022).  You can review additional details and stay up to date on the contribution limits on the IRS contribution limits page.  
  1. Borrow money from yourself.  Why take out a personal loan from the bank when you can take out a loan from your 401(k).  Instead of paying a bank interest on the money borrowed, you can pay yourself interest on top of the money borrowed over time.  The loan repayment will automatically be deducted from your paycheck on a bi-weekly basis based on term length of the loan.