4 Smart 401(k) Moves You Can Make in 2017

With traditional pensions largely having sailed off into the sunset, millions of Americans are building their own retirement incomes via employer-sponsored plans such as 401(k)s. These investment accounts are critical to our financial futures, so it's worth learning how to make the most of them.

Set yourself up for a comfy retirement. Image source: Getty Images.

First, though, let's set the stage:

• There are more than 600,000 defined-benefit plans such as 401(k)s, with more than 70 million people participating in them. As of early 2016, there was more than $4.7 trillion in 401(k) plans.
• Income from 401(k) accounts has been estimated to represent about 25% to 30% of overall retirement income.
• According to the 2016 Retirement Confidence Survey, 85% of workers eligible to participate in workplace 401(k) plans do so -- though that means 15% do not.
• The average 401(k) account balance in Fidelity Investments' managed plans was $88,900 in June, 2016.
• Here are four smart moves you can make to set yourself up for a more financially secure future.

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1. Have a plan

First off, don't just let your company move some of your salary into a 401(k) account and hope for the best. Take control of it and fit your 401(k) into an overall retirement plan. For starters, be sure to designate one or more beneficiaries for your account so that the money goes to whomever you want it to with minimum hassle, just in case you pass away.

Figure out how much you'll need to save for retirement and how you'll do so. An old rule of thumb has been to sock away 10% of your income each year for retirement, but many experts are now suggesting that 15% is better. It all depends on you, though. If you're late in saving and have little saved, aim for more. If you're still young and already have a lot socked away, 15% or less could be fine -- though saving more could help you retire early.

Don't be afraid to seek the guidance of a financial advisor, either. A advisor may be able to help you set up your 401(k) (and other investments) in the most effective way, and may save you much more than the price you'll be charged. (You can look for a local fee-only financial advisor at www.napfa.org.)

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2. Participate -- aggressively

The biggest 401(k) mistake most folks can make is simply not participating in their workplaces' plans. As noted above, about 15% of eligible workers don't do so -- and that's certainly part of the reason why, according to the 2016 Retirement Confidence Survey, among those aged 50 or older, fully 27% had less than $10,000 saved for retirement.

The minimum level at which you should participate is contributing enough to grab all available company matching money. If your employer offers a typical match -- say, matching 50% of your contributions up to 6% of your salary -- be sure to contribute at least that 6%. If you earn $50,000, you'll be socking away $3,000 and your employer will add another $1,500 -- which is free money.

Of course, contributing much more than 6% will help your nest egg grow much bigger. While IRAs have some advantages over 401(k)s -- such as much broader investment options -- 401(k) plans have much more generous contribution limits than IRAs. For 2016 and 2017, you can contribute up to $18,000 to a 401(k), or $24,000 if you're 50 or older.

If you can't start contributing at a high level, start as generously as you can, and aim to increase your contribution regularly. Contributing 10% of your earnings? Make it 11% next year and 12% the year after. Here's how much you might accumulate if you contribute aggressively and regularly, and earn an annual average return of 8%:

Calculations by author.

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3. Invest effectively

Next, be sure you're investing as effectively as you can. If you're socking away huge sums, but keeping them all in money market-like investments, those sums won't grow very quickly. Don't settle for default settings -- 401(k) plans typically feature default investment choices, and they tend to be conservative ones that won't serve you well if you're young, and may not be great if you're older, either.

Be sure to find out what kinds of fees you're being charged in your 401(k), too, and give extra consideration to choices with low fees. You can compare your employer's 401(k) with other companies at BrightScope.com. If your fees seem steep, let your company know.

Sticking long-term money in the stock market should give you a good chance of solid growth. Doing so via index funds is a great way to go, as long as they're low-fee ones focused on the broad market, such as the S&P 500, or the total U.S. or world stock market. They will likely outperform most managed stock mutual funds. There are bond and real estate-focused index funds, too. Here are some candidates to consider:

• SPDR S&P 500 ETF (SPY +0.81%)
• Vanguard Total Stock Market ETF (VTI +0.68%)
• Vanguard Total World Stock ETF (VT +0.80%)
• Vanguard Total Bond Market Index Fund (VBMFX 0.10%)
• Vanguard REIT Index Fund (VGSIX +1.05%)

Target-date funds are another good option, offering convenient and automatic asset allocation and rebalancing. A 2030 fund, for example, will assume you plan to retire near 2030, and will divide your assets between stocks and bonds accordingly. These funds aren't perfect, though. They sometimes charge high fees, and they all have different allocation formulas. Find one that suits you, or skip it.

Coordinate your 401(k) with other accounts, too. For example, if you favor your IRA because it offers wider investment options than your 401(k), first contribute enough to the 401(k) to grab that free matching money. Then contribute your next dollars to your IRA, until you max that out. Then you can return to funding your 401(k).

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4. For maximum retirement income, let your 401(k) money grow

Finally, give your saved and invested money a chance to grow for you. Don't panic when the market swoons, as it occasionally will. Be an informed investor, understanding that your investments will experience some volatility. If the market takes a nosedive, don't pull your money out, or move it to "safer" low-growth investments. Be patient.

Don't borrow from your 401(k) if you can avoid it. That's removing dollars that could be working and growing for you -- and that may never be repaid if you run into more trouble. (Not repaying such a loan can result in penalties and taxes, too.)

Don't cash out your account early, either, even if it doesn't seem to have much in it. Many people do so when they change jobs, but they're robbing their future of retirement dollars that will likely be needed. If you withdraw just $20,000 that might have remained invested for 20 years averaging 8% annual growth, you might miss out on more than $90,000 in future funds.

Keep reading up on, and learning about, money management, investing, and retirement planning. The more you know, the better off you'll likely be. Just following some of the recommendations above can leave you with several hundred thousand additional dollars in your retirement coffers.