This is the worlds leading source of financial content on the web, ranging from market news to retirement strategies, investing education to insights from advisors.
Forex Forever!

Getting the Most Out of Your 401(k)

Author: Christopher Smith

Who wants to miss out on stuff? No one, that's who. Hidden features, special offers and upgrades? I want them all. I even covet the extra donut in a baker's dozen. One often overlooked part of your life that is chock full of extra features is your workplace retirement plan – typically a 401(k). Here's a quick overview of some of the most common special features that can help increase the likelihood of your savings success.

The Freebie

You probably know that many companies offer a matching contribution that consists of an automatic contribution into your account from your employer. But are you taking full advantage of it? The so-called matching formula that stipulates how much the company will contribute may be complicated, but it's worth deciphering so you can be sure to take full advantage of this benefit.

To get it: Try to maximize the amount of money you receive through the match. Most formulas spell out how much you'd have to contribute to max out. Try to contribute at least that much. In a world where investment returns are always uncertain, match dollars flowing into your account are one of the best freebies around.

The Upgrade

Many plans will automatically increase your contribution rate every year for you. This is a great feature for increasing your savings without having to remember to do it on your own.

To get it: You typically have to select this feature (often called auto escalation or something similar, though a few employers do it for you). Your contributions will go up periodically to the maximum rate you select or your plan allows. You may still want to periodically check your savings progress – and up your contribution level again if you are not meeting your savings goals.

The Special Feature

Most plans have a default investment, such as a target date fund, with the goal of maximizing your returns at an age-appropriate risk level. Unless you have experience, interest and time to assemble a well-diversified portfolio, you may want to consider turning over your asset allocation and rebalancing to such a vehicle.

To get it: Read up on your plan's default investment strategy (sometimes called the Qualified Default Investment Alternative, or QDIA). If you are comfortable with the way the fund is managed, you won't have to do anything. But if you have investment requirements that might not reflect your age or situation (a large pool of assets outside of the plan), you may wish to consider a managed account or other more individually focused investment strategy instead.

And That's Not All

If you are age 50 or older, you can contribute an additional $6,000 to your account in 2015 – on top of what would otherwise be the maximum of $18,000. This is a great way to turbocharge your contributions as you get closer to the finish line.

To get it: This is one of those features that most plans require you to elect. But once you've boosted your rate, it typically will stay at the same level (unless you change it again). Note that your plan's recordkeeper will automatically shut off further contributions once you hit the annual maximum contribution. (One exception to that: Look out if you change jobs, plans and recordkeepers. In that case, you need to keep tabs on your contributions yourself to make sure you don't go over the limits.)

Double Feature: Keep It Longer

Many participants believe that once they retire, they are required to move their savings out of the plan, typically to an individual retirement account. But that's not necessarily the case. Many employers let retirees stay in the workplace plan – and continue to get what are most likely lower fees on their investments.

To get it: Do a side-by-side comparison of the features and costs of your alternatives. You may see a larger choice of investments outside your plan, but odds are your employer's plan has the most common investment alternatives covered, and at a much more competitive fee.

Scott Dingwell is a Director in BlackRock's Global Client Group where he serves on the U.S. and Canada Defined Contribution Team. He writes about retirement for The Blog.

More from BlackRock:

Rising Rates & Your 401(k)

When It Comes to Your Finances, 2 Heads are Better Than One

3 ways to improve 401(k) plans

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of November 2015 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary s deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain forward-looking information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

Investopedia and BlackRock have or may have had an advertising relationship, either directly or indirectly. This post is not paid for or sponsored by BlackRock, and is separate from any advertising partnership that may exist between the companies. The views reflected within are solely those of BlackRock and their Authors.

last five articles

#563 File Chapter 7 Bankruptcy

Author: Matthew Smith

There's nothing more disheartening than the feeling that you're in a financial hole from which you can't dig yourself out. When it becomes clear that – even with extreme measures – you won't be able to get caught up on overdue bills, it may be time to make a fresh start.For many Americ... see more

#867 The Risks of Investing in Art and Collectibles

Author: Daniel Harris

Collectibles are an alternative investment, which means they're not stocks, bonds, real estate or cash. Some investors jump into collectibles with both feet, assuming they can make their fortune in a world filled with schemes, con artists and fraud. Someone who knows the market well will recogniz... see more

#450 Buying A House Sight Unseen: Good Deal Or Bad Mistake?

Author: Matthew Taylor

Buying a house usually goes something like this: figure out what you can afford, find a lender, hire a real estate agent, make a list of your must-haves, view properties, view more properties, make an offer, secure your mortgage, close on your new home. Although time consuming and at times frustr... see more

#1169 Refinancing Your Home-Equity Loan: A How-To Guide

Author: Christopher Jackson

You could be thinking about refinancing your home-equity loan for several reasons. You might want to lower your monthly payment by getting a lower interest rate or extending your loan term. You might want to shorten your loan term so you'll pay less interest in the long run and be debt free soone... see more

#236 Don’t Fail Student Loan Debt 101

Author: Ethan Smith

Student loan debt is a nightmare for millions of consumers. It doesn't help that many of these loans are being managed improperly due to lack of knowledge on the borrower's behalf."It is very uncommon for consumers to have such a large amount of debt and yet not know their interest rate or... see more