3 401(k) Moves to Make Before the End of the Year

It’s hard to believe there are only a handful of weeks left in 2023. But at this point, a lot of people are finalizing their Thanksgiving menus and running up large credit card tabs to tackle their Christmas shopping lists. So it’s fair to say that 2023 is almost over.

What this means is that now’s the time to do a deep dive into your 401(k) plan. Here are some essential moves to make before the end of the year.

1. Contribute enough to snag your full employer match

Many companies that offer 401(k)s to employees also match worker contributions to some degree. If you haven’t yet contributed enough to your workplace plan to snag your full match, do what you can to sneak more money into your 401(k) before the end of the year.

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The free money your employer is willing to give you for your retirement is money you shouldn’t be quick to give up. After all, how many opportunities do you get for free money?

If your company will match up to $3,000 a year in worker contributions and you’ve only put $2,000 into your 401(k) to date, try your best to make that additional $1,000 contribution. Maybe you can use your year-end bonus or leftover money from the tax refund you got earlier in the year.

That said, 401(k)s have a strict funding deadline. You can’t contribute for 2023 purposes past Dec. 31, whereas with an IRA, you have until next year’s tax-filing deadline to finish contributing to your account.

So if you want to increase your contribution for 2023, contact your payroll administrator now and see what needs to be done. It’s probably a simple matter of filling out a form, but do it sooner rather than later so there’s time to process that change.

2. Check to see how your money is invested

Ideally, you have your 401(k) invested in different funds instead of your money just sitting in cash. But it’s important to make sure your investments are appropriate for your age and goals.

If you’re in your 20s or 30s, you don’t want your 401(k) sitting completely in bond funds. Those may not generate the same strong returns over time as funds that focus on the stock market. And you need those strong returns to grow your balance in the long run.

If you’re not sure whether your 401(k) is invested the way it should be, find a financial advisor to work with. They can review your investments and let you know if you’re on the right track or not.

3. See how much money you’ve been losing to fees

The way your 401(k) is invested will dictate how much you’ll pay in fees. Actively managed mutual funds, for example, will generally come with higher fees than passively managed index funds.

In some cases, it can be worth it to pay investment fees for the benefit of strong performance. But do a review to make sure those fees don’t seem excessive. And if you’re not sure, again, this is where a financial advisor comes in handy. They can most likely help you minimize your fees given your plan’s choices.

You may be counting down to the holidays and getting ready to ring in the new year. But take some time to focus on your 401(k). The moves you make in the coming weeks could have a big impact.

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