The following steps can help you make the most of your opportunities to save, review investments and assess whether you’re on track to reach your retirement goals.
Make the Most of 2018 Contributions
If you aren’t on track to max out your contributions and would like to add more money to your account, let your employer know immediately to find out what steps you need to take to boost your contributions in the last few pay periods of the year.
Contribute Your Year-End Bonus
If you get a year-end bonus, ask your employer if you can put some or all of it in your 401(k), provided you haven’t already maxed out your contributions for the year. Rules vary, and some plans don’t allow participants to contribute bonuses, says Marina Edwards, senior director for retirement for benefits consultant Willis Towers Watson.
But if your plan does permit this, contributing a bonus is a great way to add to your 401(k) without lowering your take-home pay. Plus, your bonus will go into the 401(k) before the money has been taxed.
Boost Your Contributions in 2019
And if you can’t afford to put away that much, consider increasing your contributions at least a little in 2019, especially if you receive a raise. Even small increases can make a big difference over time.
Make Catch-Up Contributions If You’re 50 or Older
If you’re 50 or older anytime in 2019, you’ll be able to contribute an extra $6,000 to your 401(k), bringing the total to $25,000. You can start making your catch-up contributions anytime in 2019, even if your 50th birthday isn’t until later in the year.
Consider Making Roth 401(k) Contributions
Most employers now give you a choice between making traditional 401(k) contributions, which are pretax and grow tax-deferred until retirement, or Roth 401(k) contributions, which don’t get you a tax break now but can be withdrawn tax-free in retirement. Unlike with a Roth IRA, there’s no income limit to making Roth 401(k) contributions.
If most of your retirement savings are already in tax-deferred accounts, consider making some or all of your new contributions to a Roth 401(k). This can diversify the tax treatment of your retirement savings. If your employer offers both types of plans, you can direct new contributions to the Roth 401(k) rather than the pretax 401(k) at any time, says Edwards of Willis Towers Watson.
Review Your 401(k) Investments
Check your portfolio at least once a year to see if your investment mix still matches your desired allocation. If your stock funds have performed better than your bond funds, your portfolio may be more heavily weighted in stocks—and riskier—than you originally intended. You can rebalance your portfolio by selling some of the better-performing funds and buying more of the lesser-performing funds.
Or your 401(k) may have an automatic rebalancing feature that makes the changes automatically if your allocation strays from your original plan by a certain percentage. If you don’t want to worry about monitoring the investments yourself, consider investing in a target-date fund. With this type of fund, investment professionals create a diversified portfolio based on your investing time frame, rebalance when necessary, and gradually shift to more conservative investments as your target retirement date gets closer.
Consolidate Old 401(k)s
However, you may want to keep money in old 401(k) accounts if you have access to some investments that aren’t available elsewhere.
Assess Where You Stand
Check whether you’re on track to reach your retirement goals or if you need to make some adjustments. Your 401(k) administrator may provide a retirement-savings calculator that allows you to input your current 401(k) balance and other sources of retirement income to see if your savings are on target.
If you’re falling short, you may be able to increase your contributions or decide to work longer.