Making the most of your 401(k) plan can significantly enhance your retirement savings, providing you with greater financial security in your golden years. Here’s how you can make strategic mid-year adjustments to your 401(k) to ensure you’re on track to meet your retirement goals.

Review Your Contribution Limits

First, ensure you’re aware of the 2024 401(k) contribution limits. For 2024, the maximum contribution limit for individuals under 50 is $23,000, and for those 50 and older, an additional catch-up contribution limit adds $7,500, bringing the total to $30,500. If you’re not already contributing the maximum amount, mid-year is an excellent time to increase your contributions. You can learn more about retirement contribution limits here.

Assess Your Current Contribution Rate

Check your current contribution rate. If you have room in your budget to contribute more, go ahead and do your best to reach the maximum limit. For instance, if you’ve been contributing $1,000 a month, you’ll need to increase this to more than $2,500 a month for the remaining months to reach the $23,000 limit. Sometimes, your deferral amount will need to be entered as a percentage instead of a dollar amount on the 401(k) website, keep this in mind when calculating your contribution.

Take Advantage of Employer Matching

Ensure you’re not leaving free money on the table by maximizing your employer’s matching contributions. If your employer matches, often times between 3% or 4% for a Safe Harbor plan, make sure you’re contributing at least enough to receive the full match. Mid-year is a good time to reassess and adjust if needed.

Increase Contributions Gradually

If a sudden increase in your 401(k) contributions seems daunting, consider gradually increasing your contribution rate. Even a 1-2% increase every few months can make a significant difference over time without dramatically impacting your take-home pay. Also keep in mind that if you receive a bonus or a raise, this is another good opportunity for you to increase the amount you are contributing to your 401(k).

Automate Future Increases

Many 401(k) plans offer an option to automate annual increases to your contribution rate. If you haven’t already set this up, now is a good time to do so. Automating future increases can help you reach your retirement goals without needing to remember to manually adjust your contributions each year.

Reallocate Investments

Mid-year is also a good time to review and reallocate your 401(k) investments. Assess your asset allocation to ensure it aligns with your retirement goals and risk tolerance. If the market has fluctuated, your portfolio might need rebalancing to maintain your desired allocation. Check to see if your 401(k) provider has an automatic rebalancing feature or an alert you can sign to receive when your 401(k) needs to be rebalanced.

Consider Roth 401(k) Contributions

If your employer offers a Roth 401(k) option, now may be a good time to consider contributing to it. Roth 401(k) contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. This can be a strategic way to diversify your tax exposure in retirement. Unlike with Roth IRA contributions, there is no income limit which may exclude you from making Roth 401(k) contributions.

Monitor Your Progress

After making adjustments, monitor your 401(k) account regularly to ensure you’re on track to meet your year-end goals. Make sure the changes you submitted have been reflected on your 401(k) website and statements. Keep an eye on your contributions, investment performance, and any changes in your financial situation that might require further adjustments throughout the year.

Maximizing your 401(k) contributions is a powerful step towards securing a comfortable retirement. By reviewing and adjusting your contributions mid-year, you can ensure you’re making the most of your retirement savings opportunities. Whether it’s increasing your contribution rate, taking full advantage of employer matching, or rebalancing your investments, these strategies can help you stay on track and achieve your long-term financial goals.

For more personalized advice on maximizing your 401(k) contributions, contact Navalign Wealth Partners today. Our expert fiduciary financial advisors are here to help you achieve your retirement goals with tailored strategies and high-touch personal service.