How to Magnify 401(k) Retirement Account Returns

If you have ever cracked open a financial magazine, you have surely heard you should maximize your investment in the 401(k) retirement account if your employer offers one. There are four major reasons to do this: (1) employers normally match a portion of your contributions which means you immediately receive free money, (2) your earnings grow tax-deferred, (3) you reap the tremendous benefits of compounding over decades of reinvesting your earnings, and (4) the Government effectively subsidizes your contributions by reducing your taxable income for each dollar you contribute which reduces your tax bill. It's true; you will most likely never find a better investment for your future besides owning your own home. However, are you getting the full benefits of your 401(k) investments? This article will show you a simple technique you can use to increase your future wealth by tens of thousands of dollars or more.
The "magic of compounding" occurs when you invest money and reinvest the earnings from your investment each month, quarter, or year. By doing this, the next period you have a larger investment which generates higher income. Over the long term, your investment will compound and get larger and larger until you have an amazing balance. For example, if you invest $5,000 one time in an investment that yields 1% growth per month, the magic of compounding will turn your $5,000 into $98,942 in 25 years.