If your entire retirement plan is built on maxing out your 401(k), I have some bad news: Contributing the annual maximum to your 401(k) doesn’t guarantee a comfortable retirement.
Read on to learn four reasons why maxing out your 401(k) may not be enough, and what you can do about it.
Take a look at the difference between the ending balance at 3% vs. the ending balance at 7% — it’s about $1.6 million. That’s not all free money, of course. To realize a 7% return, you must take on added risk by investing mostly in stock funds versus bond funds.
Fortunately, you can mitigate much of the risk by investing regularly over the long term. For your stocks, choose large-cap funds with low expense ratios and keep investing, no matter what. Resist the urge to change your strategy in market downturns.
