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Your Financial Life
By Transamerica / Jan 25, 2016

5 Tactics to Help You Maximize Your 401(k)


Many believe that participating in your 401(k) early and contributing to it regularly can be very helpful in building a strong retirement. In early 2015, the average 401(k) balance reached a record high of $91,300. In short, a 401(k) can be an easy and effective strategy to boost your retirement savings.

However, there are some tactics you can employ to contribute even more to your 401(k). Some of these tactics are simple and others may take a bit of research, but by spending a little time focusing on your investment, you can add even more money to your 401(k) and help set yourself up for a comfortable retirement.

1. Confirm the percentage of your contribution that your employer matches.

401(k) matching contribution amounts can vary from employer to employer. Some employers will match your contributions only up to a certain percentage. Either research on your own or consult your company’s 401(k) plan administrator to find out the percentage your employer will match. Once you know what that number is, try to make sure your are at least contributing enough to take advantage of the full match to maximize the amount of money in your 401(k).

2. Continually contribute to increase the account’s balance.

Saving for retirement involves commitment and consistency. Try your best to diligently contribute to your 401(k). Doing so can help steadily increase the balance in your account and ultimately help you meet your retirement savings goals.

3. Incrementally increase your contribution amount.

To help maximize your retirement savings, consider systematically increasing the amount you contribute to your 401(k). Keep in mind that there are IRS rules to consider before you raise your contribution. Currently, if you’re under age 50, the most you can contribute to a 401(k) is $18,000 per year. Any amount above the $18,000 limit can be subject to taxation.

4. If possible, make catch-up contributions.

If you are 50 years or older, and find you’re behind in saving for retirement, you can make yearly catch-up contributions of up to $6,000 to your 401(k). This catch-up amount can be added to your $18,000 limit, raising your overall yearly contribution limit to $24,000. Remember that catch-up contributions have to be made by the end of the calendar year.

5. Roll over your 401(k) into an IRA.

To help add investment options and opportunities to your retirement account, consider rolling your 401(k) into an IRA when and if you change jobs or retire. As you work with a qualified financial professional to help roll over your 401(k), you will have the opportunity to tailor how and where your assets are invested. A financial professional can help evaluate your adversity to risk, which is your ability to withstand volatility within the stock market, as well as help you understand the rollover process and any tax implications involved.

A 401(k) can be a great investment option for workers looking to save for retirement. As you continue in your career, take advantage of the options your 401(k) plan presents to help maximize your savings. Working to save and grow your money now will help make a better financial future.

Review the fees and expenses you pay, including any charges associated with transferring your account, to see if consolidating your accounts could help reduce your costs. Be sure to consider whether such a transfer changes any features or benefits that may be important to you.

Transamerica and its agents and representatives do not provide tax or legal advice. This article is for informational purposes and should not be construed as legal or tax advice. For legal or tax advice concerning your situation, please consult your attorney or professional tax advisor.