2. Am I maxing out my contributions or getting as close as possible?
Right now, 401(k) plans max out at $19,500 a year for workers under 50 and $26,000 for those 50 and older. If you’re an average earner, maxing out your contributions may be difficult. But if you earn a six-figure salary, it may be quite doable, so your goal should be to do just that.
But even if you can’t max out your 401(k), you should still aim to increase your contribution rate from year to year. Small boosts in your savings rate could make a big difference over time.
3. Am I investing my savings wisely?
In our example above, we saw $100,000 in employer contributions ($4,000 a year x 25 years) turn into almost $300,000. That’s the sort of thing that’s possible when you invest your 401(k) heavily in stocks.
The 8% return used above is a bit below the stock market’s average, so if you invest in stocks over a decades-long window, you might easily see that sort of return in your 401(k). And while 401(k)s generally don’t allow you to buy individual stocks, you can load up on index funds or even actively managed mutual funds that are stock-focused instead.
