401(k) retirement savings plans are something you should always be looking after, just as if it were a baby. You want to see it grow healthily and strong. This year is an unusual one because of the current global situation. There are many factors affecting the US economy and therefore American citizens’ financial situation as well. There is a lot of uncertainty, so it is good to see why you should not max out your 401(k).
The IRS has made some updates to 401(k) as well as to other retirement plans. So, it is high time you checked if it is convenient or not to make contributions up to the new $22,500 limit. Some experts argue that contributing as much as is allowed is not always sensible. Since a lot of employers and businesses are finding really hard to cope with soaring prices and inflation, they are reluctant to make a match.
If you do not find a reward for making that contribution, many workers are avoiding them. They made that extra effort to get as much money as possible for their 401(k). It was free money that was difficult to say no to. However, with the high prices and unaffordable interest rates, many are thinking about not making them. Perhaps, they might do it if the situation improves in the short term.
Do you have savings other than your 401(k) retirement plan?
Having some money apart from your 401(k) is essential for your financial situation. Any unexpected event can make many people make use of very expensive personal loans. In this way, they will end up paying much more than they realize. Others overuse credit cards and are not aware of the fact that the high-interest rate they need to face.
Many people will lose their jobs if the economy of the country does not improve. Not having a nest egg for paying mortgages, bills, as well as all the housing expenses, could be risky. You will have to face a lot of debt which could be really negative. Besides, you should have some savings because withdrawing money from your 401(k) is not for free.
Paying more taxes for the withdrawals you make from your 401(k) is not a wise thing to do. If you already owe a lot of money on credit cards and personal loans, you should not max out either. It would be best to get rid of that high-interest debt in order to keep saving for your 401(k) as soon as possible. Think of the best strategy to make the most of your money and your 401(k).