Often times in the dividend growth investing community, new investors find themselves throwing a ton of their cash at their dividend growth portfolios to increase the dividend payments as fast as possible. This is a great idea – it adds fuel to the fire and makes it burn that much faster until it’s a huge flame. However, sometimes these investors forget about the all too important 401k in lieu of simply adding to their own dividend portfolios first. This can be a huge mistake.
The stock market as a whole is a giant financial plan. Without it, retirement would be but a dream for a few and most would simply have to rely on meager savings that couldn’t grow even half as fast. Hell, even banks would have a hard time surviving without making money off of their investments. One of the best financial plans that utilizes the strength of the market is a company 401-K or stock purchase plan. If you have one offered at the business that you work in, this is one of the best places to stack your money, especially if the employer offers matching in any way to your contributions.
This is important. If you have a company that matches a portion of your contributions and you’re not at least contributing enough to get the full amount that your company matches, you’re basically just setting fire to a pile of cash that you’ve earned. Even if the company you’re working for doesn’t do a great job at managing the 401-K fund, as long as they’re not losing more than they match, you should be making a pretty decent amount off of that money . It shocks me how many people I know that simply don’t use their company’s 401-K even with this being an offering.
If you’re really lucky, you are part of a company that lets you self-direct your 401-K. If that’s the case, you can run your entire dividend growth portfolio right from your 401-K and use the match money that your employer pays you to grow your stash even larger! At the end of the day however, there is no guarantee that you will make money with the account. Then again, there aren’t any guarantees anywhere in the financial sector! My point though is that if you’re not placing money into your company’s 401-K when they offer matching, you’re simply not taking free money that has been offered up to you. Let’s not forget this while we are managing separate brokerage accounts for our dividend growth portfolios, Reapers.