Look At This Before You Contribute More to Your 401K

There is the potential that 401Ks can be positive for
employees and employers both, but this study is saying: Wait a
minute!

I recently saw a fascinating study that concluded that having a
401K leads to higher debt. The main reason for this is the move
towards automatic 401K enrollment by employers. It used to be
that if you joined a new company, you had to sign up if you
wanted to contribute to a 401K. If you have to take action to do
something, the chances of you doing it are less than if it is
automatic. Companies moved to automatic enrollment because they
could get having savings levels from those employees.
There is the potential that 401Ks can be positive for
employees and employers both, but this study is saying: Wait a
minute!


These employees automatically enrolled are carrying more debt
than those who are not enrolled. It’s not credit card debit,
which is good, but is mostly car loans and mortgages. My
experience with this is that this is because people give as much
as they can to their 401K as soon as they’re able. Why is this
bad? Because these people are not building a
foundational savings amount before putting money into their 401K.
You should not contribute to your 401K until you’ve
built a foundation.

You should not contribute to your 401K until you’ve built
a foundation. When you put money into a 401K, that money
is tied up in inaccessible without large penalties. Instead of
building up a savings account, you have money in an account that
you can’t access for decades.


How, though, does that contribute to debt? If you don’t
have liquid savings in your account even if you contribute as
much as you can into your 401K, what money can you use when you
want to make a large purchase or have an emergency?
You’ll need to take out a loan. This is okay short-term but it
will cripple your long-term growth.
Ask yourself how much money you have in your savings
account. Is it enough for your live comfortably on for 3
months? I have a challenge for you this year...

Figure out how much you want to put into your 401K and create a
plan to do that. Then instead of starting that plan, pause. Now,
ask yourself how much money you have in your savings
account. Is it enough for your live comfortably on for 3
months? If the answer is no, consider stopping
contributions to your 401K and get your savings account up to
that level. It’s worth missing up to a year of your 401K benefits
to have this emergency fund available. You’ll have more peace of
mind and a better foundation going forward. You can act
aggressively because you have liquid savings available on the
side.


Some reading this will say: that’s great advice for my
kids or grandkids, but this also applies to you! You’re
right, the advice given to young people today is to get a job and
start investing in your 401K as soon as possible. Again, this
advice can apply to anyone who is reading.


If you have a large amount of debt but you’re still contributing
to your 401K, my challenge above is great for you. Spend this
year tackling your debt, building your foundation and then
contribute as much as you can in the future. Without your
founding, your debt will only increase.
We can help you figure out how to get you out of your
stressful debt.

If you don’t know how to manage your debt and it’s overwhelming,
please know you can get out of it. We are a great resource for
you. You can set up a free consultation today and we ** can
help you figure out how to get you out of your stressful debt.**


It’s not rocket science but it does require a plan, which we can
help you put together.


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