Social Security probably won’t pay you enough for a comfortable retirement. To achieve that goal, you’ll need to save independently.
If your employer offers a 401(k) plan, that’s definitely a good place to start. Though 401(k)s aren’t perfect, they offer a few distinct benefits over IRAs.
First, they come with much higher annual contribution limits. Right now, with an IRA, you’re limited to $6,000 a year if you’re under age 50. Otherwise, your annual limit is $7,000. With a 401(k), you can contribute up to $20,500 this year if you’re under age 50. If you’re 50 or older, you get a $6,500 catch-up option that raises that limit to $27,000.
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Another perk of having a 401(k) is that many of these plans come with an employer matching incentive. Those incentives vary from company to company. You might, for example, be eligible for a free $3,000 from your employer if you put that much money from your own earnings into your 401(k).
But if you’re thinking of switching jobs, you might lose out on some or all of that free money without realizing it. And that’s something to consider before making a change.
Are you fully vested in your 401(k)?
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