Average Joes 401K Guide
Ok, ok. So this is probably the most worn out topic ever. However, based on recent survey data, only about a third of the workforce that is offered a 401k, are enrolled and contributing to it. This is a ridiculous statistic considering the average company match is 4%. Think of it this way, if your boss asked you if you would like a 4% raise, would you take it? I sure hope so. If not close this web page, there is no hope for you. All kidding aside, take a look at the numbers below to see how much FREE money you are missing.
| Current Salary | Employer Match | FREE Money | Total Contribution |
| $20,000 | 4% | $800 | $1,600 |
| $30,000 | 4% | $1,200 | $2,400 |
| $50,000 | 4% | $2,000 | $4,000 |
| $100,000 | 4% | $4,000 | $8,000 |
The calculation is easy. Take your earnings, before tax (Gross) and multiply it by the employer match.
Ex. Current salary is $36,000 per year with a 5% employer match.
$36,000 * .05 (The employer 5% match) = $1800. The total contribution is simply the employer match * 2. The other half is what you need to contribute. Hence the employer “match.” So for this example, the total is $3600 per year total contribution. Remember, this is FREE money. All you have to do is contribute your portion first.
What investments does my 401k use?
Most 401k plans consist of mutual funds that target different objectives. Most plans offer a little something for everyone. Some funds are more conservative while others are much more aggressive. The mutual funds offered are typically stock funds, bond funds, target funds, index funds, real estate funds, and more.
Stay tuned for more on how you can determine your risk tolerance and other factors on determining what funds you should invest in.
