Chances are, your 401(k) plan will play a huge role in your retirement finances -- as it should. So it's important to do what you can to grow your 401(k) balance into the largest sum possible. But failing to make these key moves in your 401(k) could prevent you from doing just that.
1. Snagging your full employer match
It's not a given that your employer will contribute money to your 401(k) plan just because you allocate funds out of your own paycheck. But thankfully, many employers do make a point to match 401(k) contributions. And if you're not putting in enough money to snag your match in full, you're limiting your plan's growth -- not to mention giving up free money.
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Let's say you give up a $3,000 match this year due to not contributing that sum out of your paychecks. If you're 30 years away from retirement and your 401(k) generally delivers an average yearly return of 8%, you'll be setting yourself up to retire with $30,000 less. That's a big deal.
2. Checking up on your portfolio once a quarter
There's no sense in checking your 401(k) balance every day -- or even every week. Portfolio values can fluctuate based on market conditions, and checking in too frequently may not be the best thing for your mental health.
But it is a good idea to check on your 401(k) once a quarter and see how your investments are performing. If you see that certain funds are consistently doing poorly, it might prompt you to make important changes.
3. Actively choosing investments
If you don't actively choose investments for your 401(k) plan, your money might land automatically in a target date fund. These funds are generally the default option for savers who don't choose investments actively.
Target date funds can be a good option for people who want to play no role in investing their nest eggs. They are set up to invest in risk-appropriate assets based on a predetermined timeline. Because of that, they don't really have to be monitored.
But there are a couple of problems with target date funds. First, they tend to invest too conservatively, which might leave you with a lower 401(k) balance than you want for a comfortable retirement. Second, these funds tend to charge hefty fees that can eat away at your returns.
That's why it's a good idea to play a more active role in investing your 401(k). And a good option that also doesn't require a lot of legwork is loading up on broad market index funds. Not only might that give you a nice, diverse portfolio, but it might also help minimize the fees you pay.
The right approach to your 401(k) could leave you with a lot of retirement wealth. That's why it's so important to claim your full employer match, check up on your portfolio regularly, and choose investments, rather than settle for an option that may not be optimal for you.
