Close this search box.

Retiring Soon? Try These 7 Tips for Managing Your 401(k) Plan

As you approach retirement, I believe it’s more important than ever to get the most out of your 401(k) plan. Here are my seven tips to help maximize your savings.

  1. Contribute to your plan. Many financial companies will encourage you to contribute 15 percent of your income to your 401(k) every year. But if you didn’t start contributing when you first had the opportunity, you probably need to make up for some lost ground. I generally recommend you up your contribution amount to 20 percent. Remember this percentage includes company contributions. For example, if your company has a 3 percent match and you put in 12, your total contribution is 15 percent.
  2. Don’t stop contributing. I’ve noticed some people stop adding to their 401(k) plans for a variety of reasons; maybe the market’s going down, or they want to spend the money they’re contributing on something else. I believe consistency over time is the way to win this game. I generally recommend that you don’t stop contributing, and if you get a raise, put in even more.
  3. Make sure you are collecting the entire company match. It’s free money, folks. If your employer matches your contribution up to 3 percent and you put in 6 percent, you’re getting 50 percent more money added for free. Find out the maximum match your company offers and ensure you are getting all of it.
  4. Make Roth 401(k) Unlike a traditional 401(k), you are taxed up front for contributions to your Roth 401(k) plan. However, the growth in your Roth 401(k) is not taxed when you take distributions in retirement. I think that’s a big advantage and if your company offers a Roth 401(k), I highly suggest you consider investing in it.
  5. Talk to someone who can help you make your investment allocations decisions. This advice may sound self-serving, but 401(k)s tend to offer a lot of choices. You could be taking a lot of risk with your money, and I think it’s wise to have an objective professional help you evaluate the options.
  6. Don’t take loans from your 401(k). Loans associated with 401(k)s have a lot of terms and conditions. There may be penalties. There may be additional taxes. We therefore generally recommend you avoid these loans if you can, especially when you’re close to retirement. I always advise people that once they’re retired, their debt should be retired, too.
  7. Review all options before rolling your 401(k) plan over to an IRA. Sometimes rolling over a 401(k) to an IRA is good idea, and sometimes it’s not. There may be different choices, different costs involved, or different rules about withdrawals. I suggest getting some expert advice before making this decision.

We would be happy to offer guidance about the best way to manage your 401(k) plan as part of a comprehensive retirement plan designed for you to have the kind of retirement you’ve always wanted. Meet with one of our financial advisors for a free consultation today.

Ken Moraif, CFP®, MBA
Senior Advisor at Retirement
Planners of America

Author of Buy, Hold, and SELL! Author Page