Whether you are in your 20s or your 50s, if you haven’t started putting money away in your 401(k), then the best time to start is the present. Many people don’t always realize that a 401(k) plan can be a major source of income to ensure a comfortable retirement. Here are six helpful ways to maximize your 401(k) growth: 

1. Contribute Automatically

Don’t wait until after you receive your paycheck to put money into your 401(k). Have the money automatically withdrawn from your income so you won’t have a chance to spend the contributions. Increase your contributions over the years as you earn more income.

2. Pick Your Own Saving Rate

The typical default saving rate for a 401(k) is about 3%. That amount doesn’t really guarantee a wealthy retirement, so take a look at your other options, and find a higher rate.

3. Look Into Employer Contributions

While most companies match a certain percentage to your 401(k), some may offer contributions based off of your income or a percentage of company profits. Weigh which scenario will save you the most money.

4. Defer Taxes 

A traditional 401(k) will allow you to defer income tax payments on your deposited money until you actually withdraw from your account. Any investment growth on the account is also tax-free.

5. Choose Low-Cost Investments

Some investments in your 401(k) may have an expense ratio that actually detracts from your retirement account, so be sure to check your options, and find investments with the lowest cost.

6. Avoid Fees and Penalties 

If you withdraw money from your 401(k) before you’re 59 1/2, you can be penalized up to 10 percent for the early withdrawal, in addition to applicable income tax. But don’t wait too long: at age 72, you are required to take what is known as a “required minimum distribution” (RMD). If you fail to do so, you will be required to pay a 50% penalty (50% of the amount of the distribution).  Are you interested in more information on how your 401(k) can be a significant source of income in retirement? If so, contact a qualified financial advisor who can help you.