15 Moves to Make With Your 401(k)

Socking money away for retirement in a dedicated savings plan is a good way to help ensure that you'll have enough income to cover your senior expenses. And if you have access to a 401(k), you have a prime opportunity to do quite well for yourself. Here are a few essential moves to make with your 401(k).

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If you're new to the workforce, you may not feel compelled to sign up for your company's 401(k) plan just yet. At this point, retirement may be many decades away and therefore not on your radar. But the sooner you start participating in a 401(k), the more opportunity you'll have to grow wealth, so it pays to sign up immediately. Doing so could also help you enjoy a nice tax break, since traditional 401(k) contributions go in on a pre-tax basis.

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Many companies that sponsor 401(k)s also match worker contributions to some degree. Be sure to put in enough money to snag that employer match in full. If you don't, you'll be giving up free cash.

You may not be able to max out your 401(k). But that doesn't mean you can't save more than what you're socking away today. Take a look at your budget and try to eke out a little extra money. The more you invest, the more tax savings you'll enjoy, and the more opportunity you’ll give yourself to grow long-term wealth.

If you're getting a raise in the near term, sending all of it right into your 401(k) is a good bet. Since that raise represents money you aren't currently spending, you shouldn't miss it by putting it into savings.

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When you first sign up for a 401(k), your money will generally be put into a target date fund by default. Target date funds are those designed to help you save for a specific milestone, like retirement. There are pros and cons to investing in target date funds, but your 401(k)'s default target date fund may not be ideal for you. A better bet may be to look at the different funds your plan offers and find those that align with your risk tolerance and goals.

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Playing it too safe with your 401(k) could leave you short on cash in retirement. Rather than load up on bond funds, consider going heavy on stocks, especially if your senior years are far off.

The great thing about index funds is that they lend to instant diversity in your 401(k) without imposing huge fees. Index funds are passively managed, as their aim is to match the performance of the benchmarks they're tied to. And so because you're not paying professionals to handpick stocks, you're not charged high fees to invest in them.

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In some cases, it can pay to invest your 401(k) in actively managed mutual funds despite the higher fees involved. But if you're going to go this route, choose your funds carefully. Focus on those with a strong performance history -- those that can more easily justify their fees.

Your 401(k) isn't something you should set and forget. Aim to check up on your investments a few times a year to ensure that their performance is meeting your expectations.

Over time, the value of different investments in your 401(k) can change. And that could lead to a mix that's less balanced than you'd like it to be. Take a look at your 401(k) and make sure no single investment has grown or shrunk to the point where it consists of most of your portfolio. If that's the case, you may need to do some shifting.

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A 401(k) loan can seem like a good solution when a need for money arises. But there are risks involved in borrowing from a 401(k), so if you have an outstanding loan, do your best to pay it back as quickly as possible.

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These days, a growing number of 401(k)s are offering a Roth savings option. With a Roth 401(k), you don't get an immediate tax break on contributions. But you do get tax-free investment growth and tax-free withdrawals during retirement.

All 401(k)s charge administrative fees, which are separate from the fees you'll pay for the investments you choose. It pays to figure out what your administrative fees look like. If they're high, you may want to talk to your employer about switching 401(k) providers.

If you're self-employed, you're generally entitled to open a solo 401(k). These plans come with generous contribution limits and are worth looking into if you're responsible for setting up your own long-term savings account.

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You can withdraw funds from a 401(k) at age 59 1/2 without incurring penalties. However, there are a few exceptions. It pays to read up on 401(k) withdrawal rules, especially if retirement is drawing near.

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Saving in a 401(k) could be your ticket to a financially secure retirement. Check these moves off your list, whether retirement is decades away or right around the corner.

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