by Jaclyn M. Cornelius, CFP®, EA, Vice President
If you are not currently maxing out your 401k/403b, consider increasing your contribution. One of the easiest ways to do this is when you get a raise. Consider increasing your retirement plan contribution by half the amount of your raise; you keep half and save the remainder.
If you are currently making $60,000 and contributing 3%, you would be contributing $1,800 annually to your 401k.
If you get a 2% raise, you now would make $61,200. If you do not make any change to your 401k contribution, that automatic amount would only increase by $36 annually out of the additional $1,200 you are making.
If you were to increase your 401k contribution percentage to 4% after your salary increase, your annual 401k contribution would be $2,448 (a $612 increase in your 401k savings over a year versus that $36).
The current IRS 401k contribution amount is $18,500 (plus the IRS allows you to add an additional $6,000 if you are age 50 and over).
Make sure you consult with a financial advisor before making decisions that could impact your long-term financial plans.