"Retirement is like a long vacation in Las Vegas. The goal is to enjoy it the fullest, but not so fully that you run out of money."
-- Jonathan Clements

Considering that many people retire (willingly or unwillingly) around age 62 and that many live to 85 and beyond, that leaves them more than 20 years (and sometimes more than 30!) in which they have to support themselves. Social Security will help, but most of us will also need additional income -- perhaps from our 401(k) plans at work. Here are three smart 401(k) moves that can boost your future net worth.

A bunch of hundred-dollar bills all rolled up in a rubber band

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Smart 401(k) move No. 1: Fill it with as much money as you can

For starters, aim to invest aggressively in your 401(k) plan (perhaps in tandem with an IRA). If your employer offers any matching funds, contribute at least enough to grab all available matching money -- as that's free money. A common employer match is 50% of the contributions you make, up to 6% of your salary. Thus, if you earn $70,000 and contribute 6% of your salary, or $4,200, your employer will chip in an additional 3%, or $2,100. That's a guaranteed 50% return on your investment.

How much more might you contribute to your account? Well, 401(k) accounts can receive many more dollars each year than IRAs can. The contribution limit for IRAs in both 2016 and 2017 is $5,500, plus an additional $1,000 "catch-up" contribution for those aged 50 or older. A 401(k) account, though, in both 2016 and 2017, can receive up to $18,000 from most people, plus an additional $6,000 for those 50 or older, giving older savers a hefty annual maximum of $24,000. The more you can sock away and the earlier you start, the bigger a retirement war chest you can build. The following table should be enlightening.

Growing at 8% For:

$5,000 Invested Annually

$10,000 Invested Annually

$15,000 Invested Annually

15 years




20 years




25 years



$1.2 million

30 years


$1.2 million

$1.8 million

Source: Calculations by author.

Three eggs, labeled Roth, IRA, and 401k, sitting on dollar bills

Image source: Getty Images.

Smart 401(k) move No. 2: Consider a Roth 401(k)

A new retirement-savings option entered the scene in 2006 -- the Roth 401(k). Just as a traditional 401(k) plan has a lot in common with a traditional IRA, the Roth 401(k) works much like a Roth IRA.

With a traditional IRA and traditional 401(k), you contribute pre-tax money that reduces your taxable income by the amount of the contribution and thereby lets you avoid being taxed on that sum in the year of your contribution. (When you ultimately withdraw the money in retirement, it will be taxed as ordinary income to you.) With a Roth IRA and a Roth 401(k), you contribute post-tax money that doesn't deliver any upfront tax break. But you eventually get a big tax break when you withdraw from the account in retirement: If you followed the rules, you get to take all the money out of the account tax-free. Take a look at the table again, and imagine having big sums like those available to you tax-free.

Roth 401(k)s are becoming more prevalent -- with more than half of employers with retirement plans offering them -- but your employer may not offer that option yet. If so, let your human resources department know that you'd like it to be offered.

Time value of money graph drawn on the chalkboard with a hand holding a chalk

Image source: Getty Images.

Smart 401(k) move No. 3: Don't cash out or borrow from your 401(k)

Finally, once you're contributing your 401(k) account -- let that money grow for you. Don't make the too-common mistake of cashing out whenever you change jobs or borrowing from a retirement account. According to Fidelity Investments, which administers millions of workers' 401(k) accounts, about one in three workers has cashed out his or her account when changing jobs. It may seem inconsequential, if you've only worked at a given company for three years and only have, say, $20,000 in your account, but if you remove even $20,000, you're removing the $137,000 it could have grown to over 25 years (assuming an 8% average annual growth rate). Such a sum would clearly be rather handy in retirement. Similarly, don't borrow from a 401(k) plan, either, unless it's an emergency and you really have no better option. That's another way of stealing from your financial future.

Don't assume that Social Security and whatever you have in the bank will support you in retirement. The average Social Security retirement benefit is only about $16,000 per year. Consider making the smart 401(k) moves discussed here, and you may end up with tens of thousands of dollars more in retirement -- if not hundreds of thousands of dollars more.