The 401K program is a tax-qualified retirement savings plan that allows individuals to save for retirement with pre-tax dollars. It is probably the most popular such plan in the United States private sector. Government employees may also qualify for a similar 401(b), while employees of nonprofit organizations qualify for a 403(b). With time, 401K contributions can accumulate into a significant amount of money for retirement. The following are some tips specifically to help women to accumulate wealth as they head into retirement.

1. Start Saving Early

The key to growing rich with time lies in signing up for a 401K plan early in life, or as soon as you get a job that offers one – even if it is optional. Any woman over the age of 18 can sign up. With even the smallest contribution in these early years, funds can grow exponentially to a significant sum thanks to the compounding effect. Even if your current job doesn’t offer a 401K, women can still go to banks, financial professionals, etc. to set up alternative retirement plans which may roll into a 401K later or act as a supplemental retirement account.

2. Contribute as Much as Possible

I believe women should contribute as much money as possible to their retirement account, which, for 401(k), 403(b) or 457 savings accounts is allowed to be tax-free for up to $17,500 per year for 2014. Given an average income of approximately $50,000, many women may not be able to meet the maximum contribution. However, I recommend they contribute at least three percent of their income to retirement, especially if their employer is willing to match contributions. Certain employers are required to match their employees’ contribution subject to certain limits, while others choose to as an added benefit.

3. Increase 401K Contributions as They Grow Older

Usually, the older a person grows, the more money they make. This allows women to increase their monthly contributions with every salary increment. Once they attain the age of 50 years, women can increase their contributions even more, since the IRS tax code allows for maximum contributions of $23,000 per year per person in 2014 for those who are over 50 years old. Even with retirement age only 15 years away, this increase will hopefully have a significant impact on their nest egg.

4. Avoid Early Withdrawals

Financial challenges may tempt an individual to make an early withdrawal from their 401K account. Unfortunately, early withdrawals attract huge penalties. This includes a ten percent penalty as well as income taxes on the withdrawn amount. This can significantly reduce the accumulated contributions, plus any interest the account may have earned or will earn. To grow rich with time, women should consider other financing options when they need money and only withdraw once they reach a certain age.

Growing rich is rarely instantaneous. In fact, it’s more likely people can lose their life savings because they invested in get-rich-quick schemes that were later discovered to be frauds. To get rich honestly without exposing themselves to unnecessary risks, women should take things slowly, letting the power of compounding interest and time work in their favor.

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