It’s the most wonderful time…to make some updates to your 401(k). The end of the year is a good time to review your retirement plan and make sure it’s working as best as possible for you. Here are some end-of-year moves to make.
Up the Ante
If you’re financially stable, it’s time to increase your 401(k) savings rate. As USA Today notes, the more you can contribute to your 401(k), the more tax savings you’ll enjoy. The best move to make is to max out your contributions. This is especially true if your employer matches them — you don’t want to leave free money on the table. Be sure to up your contributions as soon as possible, because 401(k) deposits come from your employer’s payroll, and that can sometimes take a couple weeks to get up to speed.
Redeposit if Possible
When the pandemic hit in March, the government announced the CARES Act to provide financial relief to those impacted by the virus. As part of that plan, retirement savers were able to take penalty-free withdrawals of up to $100,000 from their 401(k) or IRAs. While that was good, the taxes associated with the withdrawal were not waived. If you took that withdrawal and are on more steady ground now, redeposit those funds so you can give your money more time to grow.
Now is a good time to make sure your 401(k) investment mix is optimized. Make sure you’re not paying too many fees. If you’re young, you likely want to be more invested in higher-risk stocks. If you’re older and retirement is closing in, you likely want more invested in bond funds, which are more steady. Make reviewing your 401(k) a year-end tradition, just like setting up a kinara or menorah, or decorating a Christmas tree.