For pretty much all of 2022, consumers have had to grapple with sky-high living costs. That forced a lot of people to cut back on retirement plan contributions or even pause them altogether.

But in recent months, the pace of inflation has slowed, and the hope is that it will continue to do so in 2023. That could make funding a retirement plan more feasible. And if your financial situation really takes a turn for the better in the new year, you may end up in a position where you're able to max out the 401(k) plan your employer offers.

A person at a laptop.

Image source: Getty Images.

At first, that might seem like a great idea. But before you max out your 401(k), you may want to think about whether that plan is really meeting your needs.

There could be a better place for your money

While saving in a 401(k) is nice and convenient -- your contributions are deducted directly from your paychecks so you don't have to think about them -- there are certain pitfalls you might encounter if you opt to save in your employer's plan.

For one thing, your 401(k) might come loaded with fees. Some of those may be avoidable by choosing the right investments -- for example, opting for index funds over mutual or target date funds, which tend to come with higher expense ratios. But there are administrative fees attached to 401(k)s that can eat away at your returns. If those are hefty in your employer's plan, then you may want to put your savings in an account that won't charge as much.

Then there's the question of how you'll invest your money. You generally can't choose individual stocks in an employer-sponsored 401(k). If you're more of a hands-off investor, that may not be a problem. But if you're someone who knows the market and understands how to analyze businesses, then those are skills you may want to put to good use. In that case, you may find that an IRA is a better choice for your retirement savings.

With an IRA, you can hand-pick stocks, and the fees tend to be lower. Also, not every 401(k) plan includes a Roth savings option. But as long as you meet the income limits, you can opt to put money into a Roth IRA and enjoy the perks of tax-free investment gains and retirement withdrawals, among others.

Don't rush to max out your 401(k)

Maxing out your 401(k) might seem like a smart thing to do in 2023, especially if you've fallen behind on retirement savings recently. But before you go that route, think about how happy you really are with your 401(k). You may find that an IRA works better for you.

That said, it's always a good idea to contribute enough money to your 401(k) to claim your employer match in full, assuming you're entitled to one. That's free money you don't want to give up. But once you've snagged that match, you shouldn't feel compelled to stick with your employer's 401(k) just because the option is there.