7 Things to Help Maximize 401(k) Savings in 2024
Contrary to popular belief, there is more to maximizing your 401(k) savings than simply contributing more.
There are things you can do that don’t require you to spend a single penny.
If you want to maximize 401(k) savings in 2024, the time to plan is now. Keep reading for 7 things you can do that may help boost your retirement savings.
#1 Get Engaged with Retirement Savings
Think it doesn’t matter if you’re engaged with your 401(k) or not? Think again.
According to Empower’s second annual research study, Empowering America’s Financial Journey – How People Save, Invest and Get Advice, “Engaged participant savings rates are 56 percent higher than rates for unengaged participants. They are also more likely to take full advantage of their plan’s employer match.”¹
Empower also found, “People who are engaged and leverage educational content; seek out advice or guidance; and/or aggregate or consolidate accounts have higher savings rates than people who are not engaged.”²
Not sure where to start? Here are a few ways you can get engaged right now:
- Know your plan rules. 401(k) plans have rules – lots of them. Rules about the vesting schedule and fees make a big difference in how you save for your future. Look over your plan agreement carefully. If you can’t find the information you are looking for in your info packet, ask your plan representative or HR department.
- Learn how to read your 401(k) statement. One of the best ways to know where you stand financially is to read your 401(k) statement, but it can be overwhelming the first time you try. Don’t give up! See a breakdown of statement images, graphs, and explanations in How to Read a 401(k) Statement and Understand It to gain a better understanding.
- Make changes as needed. Part of being engaged is reading your statements and making changes as necessary. For example, you may see that it is time to buy or sell some of your assets (also known as rebalancing).
- Read up on the new rules and regulations: The Secure Act 2.0 brought quite a few changes to 401(k)s – and how you save for retirement. Find out how the new rules affect you.
Ask questions. Have questions about your 401(k) plan? Ask! Contact your HR department and find out the details of your plan. Have questions about your personal financial situation? Talk to a financial advisor.
#2 Don’t Stay with the Default Option
Many 401(k) plans have adopted automatic enrollment for employees.
According to Vanguard’s How America Saves 2023 report, “71% of [plan participants] had their entire account invested in a single target-date fund in 2022.”³
While there are some benefits to auto-enrollment, a 401(k) is not something to set and forget.
Unfortunately, many employer plans auto-enroll employees using the target date fund option, and this default option isn’t the best choice for everyone.
The issue with target date funds is that investors are grouped solely based on their expected retirement date, while other important factors, such as location, profession, salary, risk tolerance, goals, and objectives, are NOT taken into consideration.
If you’re looking to maximize your 401(k) performance in 2024, think long and hard about sticking with the default target date fund.
There are other investment options available to you where you can take into account your risk tolerance and your unique goals and objectives.
[Related Read: 3 Ways Target Date Funds May Hurt 401(k) Investors]
#3 Reassess Your Risk Tolerance
There is a common belief in investing that suggests sacrificing good returns for safety and security.
However, this belief can be quite costly, particularly for those nearing retirement.
If you’re too heavily invested in bonds as you near retirement, you may miss out on potential gains.
Morningstar reported that, “Since World War II the S&P 500 stock index has returned 11.1 percent, which is 7 percentage points more than the CPI. Even if future returns don’t match those gains, equities are still likely to outperform other assets over the long term.”⁴
That’s why it’s important to reassess your risk tolerance from time to time.
If you haven’t done it in a while, the time is now.
#4 Rebalance Your 401(k)
Many investors set up a 401(k) and don’t give it much thought until they are ready to retire.
This isn’t the way to maximize 401(k) savings. Far from it.
It’s necessary and important to rebalance your investments if you want to get the most out of your hard-earned savings.
Here’s why: The investments you originally chose may not be the most effective ones for maximizing your 401(k) savings goal today, which is why you need to reassess and rebalance your investments.
Rebalancing allows you to take advantage of opportunities for growth during good markets and potentially avoid losing money when the market turns down.
It’s all about being in what’s working right now and out of what’s not working.
[Related Read: What Every Investor Needs to Know about Rebalancing a 401(k)]
#5 Plan to Save More or Even Max Out Your 401(k) in 2024
According to Vanguard’s How America Saves, “15% of participants saved the statutory maximum amount of $20,500 ($27,000 for those age 50 or older).”⁵
The report also states that only 16% of eligible participants (those ages 50 and older) took advantage of catch-up contributions.⁶
With a retirement crisis in America, it’s clear we need to be saving more for our future.
If you want to maximize 401(k) savings, make it your goal to increase your contributions and save more than you have in years past.
Even better, if you can, try to contribute the maximum amount this year.
Employee 401(k) contribution limits for 2024 have increased to $23,000.
For those ages 50 and older, the 401(k) catch-up contribution is $7,500, for a total of $30,500.
[Related Read: Big Catch-Up Contribution Changes Coming in 2024]
#6 Get the Company Match No Matter What
If your employer offers a company match, do whatever you can to get the match.
If you don’t contribute enough to get the company match, you are basically turning away free money.
For example, let’s say your company matches 100% up to 6% of your pay.
If you make $40,000 a year, you could put in $2,400 (or 6%) for the year, and your company would match this 100%.
This means you would get $2,400 of free money toward your retirement!
[Related Read: 4 Ways to Potentially Maximize Your 401(k) Company Match]
#7 Seek Professional Help
If you have hesitated to seek expert advice, let 2024 be the year you make it happen.
Not only will it boost your knowledge, but it also has the potential to boost your savings.
A 2014 study compared those who had help managing their 401(k) and those who did not over a 6-year period.
“On average, the median annual returns for participants in the study who got Help were more than 3% (332 basis points, net of fees) higher than people who didn’t get help.”⁷
Whether you are just starting to dream about your retirement or nearing retirement, it’s wise to talk to the experts.
401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.
Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.
With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.
Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) strategy session with one of our advisors.
Book a 401(k) Strategy Session
Sources
- https://www.empower.com/press-center/empowering-americas-financial-journey-2022
- https://www.empower.com/press-center/empowering-americas-financial-journey-2022
- https://institutional.vanguard.com/content/dam/inst/iig-transformation/has/2023/pdf/has-insights/how-america-saves-report-2023.pdf
- David Blanchet, Morningstar Analyst 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
- https://institutional.vanguard.com/content/dam/inst/iig-transformation/has/2023/pdf/has-insights/how-america-saves-report-2023.pdf
- https://institutional.vanguard.com/content/dam/inst/iig-transformation/has/2023/pdf/has-insights/how-america-saves-report-2023.pdf
- AON Hewitt “Help in Defined Contribution Plans: 2006 through 2012” Published May 2014
