A 401(k) plan can be an excellent financial vehicle that helps you save for retirement. You get to enjoy a host of benefits in the process, such as matching contributions from your employer, the ability to invest pre-tax dollars (which cuts down your taxable income), and earnings that accrue on a tax-deferred basis.

Nevertheless, there are certain things that you may not know, but will be of great help in making the best use of your plan and avoiding costly mistakes. AOG Wealth Management, your experienced wealth management advisor serving Washington, DC and Northern Virginia, shares three essentials:

1. You Can Make a Much Higher Contribution

Many employees contribute just enough to their 401(k) to benefit from their employer’s matching contributions. While this is often a great starting point, you can and should contribute more. It’s easy to get stuck on the average 3.1% auto-enrolled rate, but many employers can make matching contributions of up to 6% of your base salary.

As such, you can double your money simply by participating in a higher payment plan. This small increase in your savings rate can also go a long way to reducing your tax burden for the current year.

2. Borrowing from Your 401(K) is Generally a Bad Idea

Most 401(k) plans allow you to borrow up to 50% of your vested balance. In addition, it is readily available and doesn’t require a credit check, unlike other loans. However, you have to repay this loan with interest, which is the prime rate plus 1%, within five years. If you default or leave your workplace without paying back the full amount, the outstanding amount will become taxable and be subject to a 10% penalty.

As the experts in investment management in Ashburn, VA , we can provide you with other suitable options to help you meet your financial goals.

3. Your 401(K) Plan Can Come with Attached Fees

Most people simply aren’t aware of these fees, because they don’t see them. These fees vary widely, but the actual amount usually depends on the negotiating muscle of the company. Keep this in mind as your expected balance may vary.

Contact us for professional wealth management in Washington, DC and Northern Virginia today. We offer unique solutions based on your personal goals, circumstances, and objectives.

Call us at 1-877-600-3573 or fill out our request form for a complimentary consultation. We look forward to working with you to attain your financial freedom.