Now Is the Time to Check Your 401(k): Why Evaluating Your Contributions Matters

As we navigate through the year, it’s essential to take a moment to check your 401(k) plan. Regularly evaluating your retirement savings can make a significant difference in achieving your financial goals. Here’s why now is the perfect time to check your 401(k):

Assess Your Contributions

• Maximize Your Savings: Ensure you are contributing enough to your 401(k). The IRS sets annual limits on contributions, so aim to get as close as possible to these limits if you can afford it. For 2024, the contribution limit for employees under 50 is $22,500, and for those 50 and older, it’s $30,000.
• Automate Increases: Some plans offer automatic contribution increases. If your plan has this feature, consider setting it up to gradually increase your contributions over time.
• Don’t Run Out of Time: Unlike IRAs where you have time to contribute the following year, a 401K plan does not. Give yourself enough time in the year to contribute a little extra if that’s possible.

Employer Matches: Don’t Leave Money on the Table

• Free Money: Many employers offer matching contributions up to a certain percentage of your salary. Failing to contribute enough to receive the full match is essentially leaving free money on the table. Make sure you’re contributing at least enough to get the maximum match. If an employer offered you a 10% raise would you turn that down? Why would you turn down an employer match?
• Review Match Policies: Employer matching policies can change, so review your plan details periodically to ensure you’re taking full advantage of any available match.

Rollover IRAs: Avoid Costly Mistakes

• Understand Your Options: If you’ve recently changed jobs or retired, you may have rolled over your 401(k) into an IRA. It’s crucial to understand the fees and investment options available in your new account.
• Hidden Costs: A recent Wall Street Journal article highlighted that many savers unknowingly incur higher fees and miss out on better investment options by rolling over their 401(k) into an IRA. Carefully compare the costs and benefits of keeping your funds in a 401(k) versus rolling them over.
• IRA Management: As the WSJ pointed out in their article, unlike a 401(k), the default option is cash, and at most brokerages that cash typically pays almost nothing. Make sure when you roll over funds, the money is deposited into a money market account, paying market interest, until you find a more appropriate place.
• Seek Professional Advice: If you’re unsure about the best course of action, consult with a financial advisor to help you navigate the complexities of rollovers and ensure you’re making decisions that align with your retirement goals.

Final Thoughts

Regularly reviewing and adjusting your retirement savings strategy is vital for long-term financial health. By checking your 401(k) contributions, maximizing employer matches, and carefully managing any rollovers, you can ensure that you’re on the right track toward a secure retirement.

If you have any questions or need personalized advice, feel free to reach out for a complimentary consultation. Whether you’re just starting out or thinking about retirement now, together, we can navigate your financial journey and make informed decisions to secure your future.