7 decisions that can grow or slow your 401(k)
See how different investors reach mixed outcomes based on their choices. Each of your decisions compounds over time, and small decisions can lead to massive differences in retirement wealth. Don’t leave free money, investment growth, or financial security on the table!
Enroll in your 401(k) plan sooner than later.
The earlier you start, the more time your money has to grow!
Sarah and Kevin started at the same company at 22 years old, earning $60,000 per year. Sarah enrolled in her 401(k) on Day 1, contributing 10% of her salary. Kevin, thinking he’d “wait until he made more money,” delayed signing up for five years.
Assuming a 3% annual salary increase and a 9% annual investment return, let’s fast forward forward to when they’re 65 years old:
Maximize employer contributions.
Not taking full advantage of a 401(k) match is like refusing a raise.
Maria and Jason both had jobs that offered a 4% 401(k) match. Maria made sure to contribute at least 4% of her salary, effectively doubling her contributions. Jason, however, only contributed 2%, thinking he couldn’t afford more.
Fast forward 20 years:
Plan to increase your contribution rate.
Small, automatic increases make a massive difference over time.
Emily contributed 6% to her 401(k). Her friend Rob started at 6% but increased his contribution by just 1% per year until he hit 15%.
Fast forward to retirement:
Choose the right investments with low-fees.
High fees eat away at your returns. Low-cost index funds win long-term.
Chris and Mark both contributed $500 per month to their 401(k). Chris invested in a low-cost S&P 500 index fund (0.05% fee), while Mark picked a “hot” actively managed mutual fund with 1.2% in annual fees.
Fast forward 40 years:
Set up auto-rebalancing.
Auto-rebalancing ensures your portfolio stays aligned with your retirement goals.
David started investing in a mix of stocks and bonds at 30, but never checked his account again. By 60, his portfolio had become too risky, with 90% stocks and only 10% bonds. When a recession hit, his portfolio lost 40% before retirement—just when he needed the money!
Name your beneficiaries.
Always review your beneficiaries after major life events.
Mike never updated his 401(k) beneficiary designation after getting married. When he passed away unexpectedly, his ex-girlfriend from college (still listed as his beneficiary) inherited his entire 401(k)—instead of his wife and kids.
Keep refining what you need for the future.
Estimating your needs early prevents surprises later.
Jessica assumed $500,000 was enough for retirement. But after using a 401(k) calculator, she realized she needed $1.5 million to maintain her lifestyle. Luckily, she adjusted her savings strategy early to stay on track.
Just stay consistent & ignore the noise.
The biggest mistake investors make? Trying to time the market. Stay the course!
Tony tried to time the market, jumping in and out based on the news. His friend Brian stayed invested through all market ups and downs.
Fast forward 30 years:
Want to maximize your 401(k) and make smarter career decisions? Check out Becoming a 401(k) Millionaire for everything you need to know about building wealth for your future!