Investing can help you build wealth because you earn a return on your money. Your invested dollars work for you, helping your pot of cash to grow over time.
In most cases, you'll have to take on at least some risk to earn a good return. And with the stock market producing average annual returns of around 10% over time, it can take a long time to double your money unless you're a very smart investor.
But there's one exception to this: Some Americans can immediately get a 100% return on an investment without taking any risks. Here's how.
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Claim your full employer match to get an effortless 100% ROI
You have the option to get an immediate 100% return on a safe investment if the company you work for offers a one-for-one 401(k) match.
Say, for example, your employer offers to match your contributions in full on up to 4% of your annual salary. If you make $50,000 and you invest the $2,000 necessary to get your full match, your employer will put another $2,000 into your account. You'll have made a 100% return and doubled your money, just by putting it into a 401(k).
Now, not everyone gets a 100% match, and sometimes employer 401(k) contributions don't vest immediately. If that's the case, you might have to stay with your company for several years in order to get to keep the money your company gives you. Or you may need to invest a little more of your own money to earn the full match. If your employer matches 50% of contributions up to 4% of your salary, you'd need to invest $4,000 to claim your free $2,000.
But even if you can't immediately access your free 401(k) match or your employer doesn't immediately double every dollar, it's still worth maxing out your matching funds since your employer is literally giving you free money just for making a tax-advantaged investment for your future.
Don't miss out
Unfortunately, many people don't max out their employer match, often because it can be hard to save enough to earn it. But it's worth reworking your budget and making the necessary sacrifices to avoid passing up on this important source of retirement aid. After all, you need retirement money to supplement Social Security, and it's a lot easier to save enough when your employer is giving your efforts a boost.
Now, once your money (and your employer's contributions) are deposited into your 401(k), you must decide what investments to put the money in. Usually, you'll have a choice of different index funds. Once you've begun investing the money, you are putting it on the line and taking a risk without a guaranteed return.
But since you've hopefully already doubled your money and earned the easy risk-free 100% return that comes from your employer match, you're starting out ahead of the game. Just take the time to research your investment options and build a portfolio of low-fee investments that expose you to an appropriate level of risk given your age.
If you aren't maxing out your employer match, you're missing out on a golden opportunity, so sit down today and find ways to increase your contributions to your 401(k) so you can take full advantage of the chance to get the best guaranteed ROI you'll find anywhere.
