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Make The Most Of Your 401(k) Before New Year's Day

With Thanksgiving now behind us, the new year is right around the corner. As you begin to consider resolutions for 2014, don't forget there's still time to make some personal finance moves this year that could pay off well beyond 2013.
Catherine Golladay
By 

Senior Vice President, 401(k) Participant Services and Administration, Schwab Retirement Plan Services

Senior Vice President, 401(k) Participant Services and Administration, Schwab Retirement Plan Services
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With Thanksgiving now behind us, the new year is right around the corner. As you begin to consider resolutions for 2014, don't forget there's still time to make some personal finance moves this year that could pay off well beyond 2013.

This is especially important for anyone saving in a 401(k) plan. I always advise individuals to use this time to take careful stock of their 401(k) account balance, investment choices and contributions. Here are some tips to help make the most of your 401(k) savings as 2013 winds down:

  • Meet the max -- or get closer to it. The annual federal 401(k) contribution limit is $17,500. If you haven't yet met the limit, consider increasing your contributions for any remaining pay periods to save as much as you can before the year ends. If you're 50 or older, you can save an additional $5,500. Every bit helps, and since traditional 401(k)s are funded with pre-tax dollars, you can reduce your 2013 taxable income, too.

  • Put your raise to work for your future. For many workers, annual performance reviews mean raises and promotions starting January 1. While it may be tempting to splurge on extra presents, try to sock away more in your 401(k). Raising your savings rate by even just a percentage point or two now might translate into thousands more in retirement by giving your assets the chance to compound and grow over time. Increase your savings rate now, before you get that first check in the new year. Remember, pay yourself first.

  • Rebalance after a banner year. This year saw record stock market highs, which may have served your 401(k) balance well. However, you may find that your allocations have changed as stocks likely outperformed bonds and other types of investments in your portfolio. You need to make sure you've still got the right mix to provide the desired balance of growth, return and risk. Many plans have tools to rebalance your account automatically or offer professional advice to help you better understand the process and your options.

  • Review your beneficiaries. If you've experienced a major life change in 2013 -- like marriage, a new child, or divorce -- you should review your 401(k) plan's beneficiary designations and make sure they reflect your current situation. By law, your spouse is always entitled to a 401(k) inheritance unless they legally sign away that right.

  • Perform a gut check. The end of the year is also a great time to reflect on how far you've come in meeting your savings goals and what's left to accomplish. One great way to do this is by using a free online calculator, which is designed to help you chart out your path to retirement. Understanding where you are is a critical step in getting where you want to go.

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