How to Ensure Your 401(k) is Building, Not Destroying, Your Wealth

The 401(k) plan, along with other retirement accounts, is a highly dependable means of wealth accumulation. For many millionaires in the United States, it represents one of the primary sources of financial growth, often surpassing the impact of starting a business. However, many employees do not fully maximize the benefits of their 401(k) plans due to a lack of proper understanding and guidance. Regrettably, the 401(k) is frequently overlooked as a significant component for wealth creation. As a result, the potential for wealth accumulation is often destroyed rather than built. Here are three tips to optimize the use of your 401(k), 403(b) or other retirement accounts. First, ensure that your portfolio has an appropriate level of diversification and concentration based on your age and risk profile. Next, consider avoiding investment options with high expense ratios, as these can reduce your potential for long-term wealth accumulation. Third, it is essential to regularly rebalance your 401(k) account, particularly when your company provides matching contributions. As a bonus tip, the 401(k) often comes in different flavors- pre-tax, Roth, and after-tax, each with its own set of benefits and considerations. Learn to capitalize on the full range of your specific 401(k) plan. If you don’t have access to an employer based 401(k) or 403(b) plan, there are several other options like Individual Retirement Accounts (IRAs) that offer similar benefits. Keep building wealth!