401(k) – Part 1

Are you investing in a 401(k)?

Maximizing a company’s 401(k) is advantageous. It’s become the dominant source of retirement savings for most Americans. Today, more than six trillion dollars are estimated to be held in these accounts by more than 80 million workers. 401(k)s provide tax benefits and protect retirement savings from losing real purchasing power through inflation. On the downside, they’re risky due to market fluctuation. Your oversight and the active management by a third-party administrator are essential.

The Bible emphasizes saving. In Genesis, Joseph instructed Pharaoh to save during the good years to prepare for a prolonged famine. In Proverbs 6, ants gather food during the harvest to prepare for the coming winter. We demonstrate wisdom through constraint and preparation for an unknown future. Proverbs 21:20 says, “The wise man saves for the future, but the foolish man spends whatever he gets.” Before maximizing long-term savings, make sure you’re simultaneously building your emergency fund. I recommend setting aside one month of your current salary before contributing to a 401(k). Once achieved, begin making deposits into the company plan while continuing to build an emergency fund that will cover three months of expenses.

Start small, be consistent, and save before spending. Establishing an emergency fund will take you a while, but don’t get discouraged. It’s an important step that will pay lifetime dividends in reduced stress and learning to live beneath your means.

And if your savings are limited due to credit card debt, let Christian Credit Counselors help. They can create a debt management plan specifically for you. For more information visit online at crown.org/ccc.