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Supercharge Your Savings: The Power of Contributing to a 401(k)

Saving for your future and achieving long-term financial security can seem overwhelming, but it doesn’t have to be. One of the best ways to save is by contributing to your Northrop Grumman Savings Plan (NGSP), a 401(k) plan where your contributions can grow significantly over time.

Here’s a quick guide to understanding and making the most of the NGSP.

So, what’s a 401(k)?

A 401(k) is a retirement savings plan sponsored by an employer, that allows employees to save and invest a portion of their paycheck. Oftentimes we don’t grasp the full power – or earning potential – of savings plans like the NGSP. The contributions* you make have the potential to grow over time through investments in stocks, bonds, mutual funds and – depending on your contribution type – major tax benefits. Northrop Grumman even offers a 401(k) match to help you build retirement savings.

How can I contribute to the NGSP?

All eligible employees are auto enrolled, but you can change the percentage you contribute at any time on NetBenefits. Northrop Grumman automatically deducts your desired contribution rate from your paycheck and deposits it into your NGSP account.

Based on your preference, you can make three types of contributions:

1. Pre-tax: Contributions are taken out of your paycheck before taxes, which reduces your taxable income at the end of the year. You also aren’t taxed on the money while it grows in your account. You will, however, pay taxes on the money when you withdraw it.
   
   
2. Roth 401(k): Contributions made after your paycheck is taxed. This means when you reach retirement age, you can withdraw the money without paying additional taxes.
   
   
3. After-tax: If you’ve reached the maximum limit for your pre-tax and Roth 401(k) contributions, you can save even more by contributing after-tax dollars.

Good news – you don’t have to choose just one type of contribution (although you can if you want). Northrop Grumman allows you to split your savings across these contribution types, and you can choose what percentage of your paycheck goes toward each.

Tip: For all accounts, money needs to be held until you reach retirement age (59.5 years old), but you can access your money under financial hardship scenarios or through a loan. 

Does Northrop Grumman offer a 401(k) match?

Yes. Not only can you put money aside from your own paycheck, Northrop Grumman will also contribute money to match your contributions. This is free money with no strings attached, as an investment in your financial well-being. Contribution rates vary based on the plan, and you can view your match rate by logging into the Total Rewards Gateway, then visiting the Northrop Grumman Savings Plan page.

Tip: Employees 50 years and older are able to contribute additional money to their 401(k), called a “catch-up” contribution. For 2024, the catch-up contribution limit is an extra $7,500 on top of the $23,000 limit for everyone else.

How do I maximize my retirement savings?

Contributing to a 401(k) is a great start. Here are additional tips to help you save for retirement.

1. Prioritize Saving Money. The earlier you start saving, the more time your investments have to generate even more money, helping you accumulate savings more quickly. But it’s never too late to start.
   
   
2. Don’t throw away free money. Try to take advantage of the full Northrop Grumman match. While Fidelity’s recommendation is to save at least 15 percent of your income annually (between employee and employer contributions), everyone’s financial situation is different. Consider small steps – even increasing your contribution by one percent can make a big difference. You can even schedule your percentage to increase automatically each year on NetBenefits.
   
   
3. Assess your savings status regularly. Did you get a merit increase? Has your financial situation changed? Do your investments match your financial goals? Take the Financial Wellness Check-Up to learn how you can improve your financial health.
   
   
4. Seek financial advice. Schedule a free financial consultation with a Fidelity advisor for personalized guidance and answers to questions such as, “Am I contributing enough to the NGSP?”, “Have I selected the right investments?” or “Will I have enough to retire?".

*Investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Written by: Caitlin OConnor