Now that we're creeping toward late November, it's time to really think about the financial goals you set for yourself earlier this year, and whether you're on track to meet them. And if one was to maximize your 401(k) in 2017, here are two specific moves you can't afford to wait on.
1. Increase your final contributions for the year
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The beauty of the 401(k) lies in its generous annual contribution limits, which are currently $18,000 for workers under 50 and $24,000 for those 50 and over. (Note that these limits will increase by $500 next year.) If you've yet to come close to maxing out this year, now's the time to work on increasing what could be your final contribution or two for 2017. Even if maxing out isn't feasible, it still pays to increase your December contributions to eke out a little extra savings -- and tax break.
Remember, the money you contribute to your 401(k) goes in on a pre-tax basis. If you typically put in $500 a month, but manage to contribute $1,000 in December, you'll save an extra $150 on your 2017 taxes if your effective tax rate is 30%.
It also pays to increase your final 401(k) contributions if doing so enables you to snag your employer match in full. It's estimated that 25% of employees don't contribute enough to their 401(k)s to get all of the matching dollars they're entitled to, and that's a shame, because what they're really doing is passing up free money.
If you're not sure whether you can swing a higher contribution rate for the remainder of the year, consider taking on a temporary side gig to generate that extra cash. Retailers tend to need more hands on deck around the holidays, so you might manage to snag an evening or weekend job for the month of December with no additional strings attached. Similarly, some restaurants might see an uptick in customers during the holidays, so picking up a few shifts could be an option.
No matter what tactics you employ to come up with some extra cash for your 401(k), be sure to act now. Depending on your company, it might take a pay cycle or two to have your new contribution rate kick in. If that money doesn't hit your account by year-end, you can't count it for tax purposes.
2. Check up on your investments
The money you put into your 401(k) doesn't just sit there doing nothing. Rather, it gets invested to ideally generate a decent return. The problem, however, is that your plan's investments no doubt come with fees that can eat away at those returns, and that's why it's important to monitor your account regularly. If you've yet to check up on your 401(k) fees this year, now's the time to change that. A frightening 92% of Americans with 401(k)s fail to pay attention to fees, and lose countless dollars of earnings as a result.
But it's not just fees you should look at; you should also check up on your investments' performance and make sure you're seeing the returns you want. If not, then you may want to shift some investments, whether it's moving to more aggressive funds, or doing the exact opposite.
Finally, make sure you have a decent range of investments in your 401(k). Putting all of your retirement savings into foreign growth funds probably isn't the best idea. Instead, spread your 401(k) dollars around so that you're dabbling in both domestic and international funds, and funds with different strategies and growth targets.
Don't let 2017 come to a close without reviewing your 401(k) and squeezing out a little extra in contributions. If you give your account the attention it deserves now, you'll be happier for it in 2018.
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