The Time Is Now to Get Engaged with Your 401(k)
September 9 is National 401(k) Day, and to help you get in the spirit, we’re sharing 7 ways to use this tool to potentially change your life in retirement.
But first, a bit about this holiday. It was started by the Plan Sponsor Council of America (PSCA) back in 1996 to encourage companies to help their employees stay informed and knowledgeable about retirement planning and preparation
Our mission at 401(k) Maneuver is to help prepare you for a life of abundance in retirement through our professional 401(k) account management service and through our educational content.
That’s why we put out articles and YouTube videos each week – with the hope that you discover more ways to positively impact your retirement savings and get engaged with your financial future.
Watch Our Latest Market Commentary
In the spirit of engaging more with your 401(k), keep reading for 7 ways you can get the most out of your 401(k).
7 Ways to Get the Most out of Your 401(k)
#1 Increase Your Annual Contributions
Employee 401(k) contribution limits for 2022 are $20,500. This applies to 401(k), 403(b), most 457 plans, and the federal Thrift Savings Plan.
For those age 50 and older, the 401(k) catch-up contribution is $6,500.
Not everyone can max out their 401(k) contribution limit each year. It can be a big stretch for many – especially in this high inflationary environment we’ve been living in.
However, just saving a little bit more than you did last year can help you more than you might think when it comes time to retire.
See if you can save 2% more than you did last year. If you can swing 5% more, do it. If you have to, make cuts in discretionary spending to make extra contributions each pay period.
#2 Contribute at Least the Company Match
The 401(k) company match is a powerful tool that may help you maximize your 401(k) retirement income – without contributing any additional money of your own.
Think of it as free money for your future.
How much you receive depends on the terms of your 401(k) plan.
Many employers match a percentage of employee contributions, up to a certain portion of the total salary. However, some match employee contributions up to a certain dollar amount.
Whatever your plan rules, make sure you aren’t leaving free money on the table.
Check out 4 Ways to Potentially Maximize Your 401(k) Company Match.
#3 Know Your Company’s Vesting Schedule
Many 401(k) investors receive a matching contribution from their employer and often wait years before the money is fully theirs.
Some don’t see any employer matching dollars because they leave the company too soon.
If you don’t want to lose your company’s 401(k) match, it’s critical to know your 401(k) vesting schedule.
Find out How 401(k) Vesting Works and Why You Should Care.
#4 Open Your Statements
Far too many investors don’t know how to read a 401(k) statement, much less understand it.
There’s a lot in a statement. Knowing how to read and understand the information presented in a 401(k) statement may be vital to your retirement future.
If you don’t pay attention to how your 401(k) is performing, understand what you’re paying in fees, or rebalance at least quarterly, you are not in control of your financial future.
Here’s a breakdown of the 3 reasons you want to make it a point to open and read your 401(k) statements:
- See how your 401(k) is performing.
- Understand what you are paying in fees.
- This is the part of your retirement that you control.
Find out How to Read a 401(k) Statement and Understand It.
#5 Don’t Settle for the Default Investment Option
These days, it’s not uncommon for employees to be automatically enrolled in their 401(k) plans.
In fact, more and more companies’ 401(k) plans use target date funds (i.e., 2030, 2040, 2050 funds) as their default option, or Qualified Default Investment Alternative (QDIA).
They’re allowed to do this thanks to the Pension Protection Act of 2016, which allowed employers to direct plan participants’ assets into a target date fund and not be liable – should the employee not select an investment.
The issue arises if the default investment option selected for you is not right for your retirement goals and objectives.
Check out the other options inside your plan to see if they may have lower fees and better long-term performance over the default option.
Call your HR department or plan provider, and find out what options are available to you.
Check out 3 Ways Target Date Funds May Hurt 401(k) Investors.
#6 Stop Leaving Your Savings to Chance
Many investors who have left a 401(k) behind with their past employer may not think it’s a big deal. But it is.
And it’s one that may be costing you more in retirement savings than you think.
You may be able to leave your 401(k) account with your previous employer, but there are several disadvantages to doing so:
- Your account will remain subject to plan rules.
- You will continue to have limited investment options.
- You will have another account to keep up with.
And then there are the ongoing fees that you incur. You may not even realize your old 401(k) may be a high-fee plan.
Another disadvantage in leaving behind a 401(k) is that it may result in overlapping funds that may not suit your tolerance for risk and you may be missing out on earning more and keeping more of your savings.
Find out How Much Your Forgotten 401(k) Is Costing You in Potential Savings.
#7 Get Engaged and Stay Informed
If you really want to increase 401(k) savings, one of the best things you can do is to be engaged with your investments.
For many, a 401(k) is the largest asset come retirement. So why leave your financial future to chance?
When you gain the necessary knowledge, you may go from being a disconnected investor to one who is engaged with your 401(k) savings and the overall health and well-being of your financial future.
And that means you are in control.
There are numerous free online resources available to 401(k) investors – all you need to do is dedicate a bit of time and energy to your education.
401(k) Maneuver is committed to providing you information that will help you become a better 401(k) investor.
Subscribe to our YouTube channel and get notified every time we post a new video with tips on how to maximize your retirement savings or on important changes that may impact your 401(k).
Subscribe to this blog and get weekly email roundups on the latest 401(k) news and tips on how you can become a better investor.
