Retirement Retirement Planning

11 Proven Strategies To Boost Your 401(k)

Here are some savvy ways to boost a 401(k) so you can fund bucket-list dreams during your golden years.

By Sarah Sharkey

Edited by Chris Kissell

Updated Dec. 17, 2024

Millions of American workers planning for retirement use a 401(k) plan to build up their savings. Crafting the right savings strategy is important to getting the most from this type of account.

After all, the decisions you make in the decades before retirement will determine the size of your nest egg when your golden years finally arrive.

Following are some expert strategies that can help you maximize 401(k) savings.

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What is a 401(k)?

A 401(k) is an employer-based tax-advantaged investment account designed to help you save for retirement. Within your 401(k), you can purchase stocks, bonds, and other investments in the hope that your money will grow over time.

Once you retire, you can withdraw cash from the account and use the money to pay for everything from monthly bills to fancy vacations. A 401(k) plan can be a great place to build wealth so you have extra financial stability during your golden years.

Considering those facts, let’s examine some expert strategies for maximizing your 401(k).

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Start early

Saving and investing your money early allows you to tap into the power of time. With time on your side, investments have the runway necessary for growth to compound over the decades leading up to your retirement.

For example, let’s say you invest $50 per month through a 401(k). If you earn 8% returns over a 30-year period, you’ll have $67,969.94.

However, if you give those investments just 20 years to grow, you’ll only have $27,457.18. The best time to start investing for your future is right now.

Contribute enough for an employer match

If your employer offers a matching contribution, do everything you can to meet that match. Otherwise, you're essentially leaving free money on the table.

Many employers match 401(k) contributions up to a particular percentage of a worker’s salary. For example, your employer might offer to match up to 3% of your salary.

That means if you contribute 3% of your salary to your 401(k), your employer will contribute the same amount from its end. Over time, this “free cash” can make a big difference in how much you end up saving for retirement.

If you're unsure whether your employer offers a matching contribution, contact your human resources department for the answers you need.

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Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.¹ This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. To get stock reward, new customers need to sign up, get approved, and link their bank account. Stock rewards shares cannot be sold until 3 trading days after the reward is granted and the cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at <a href="https://robinhood.com/us/en/support/articles/open-account-pick-your-stock/">rbnhd.co/freestock</a>. Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement. Robinhood Gold is offered through Robinhood Financial LLC and is a membership offering premium services available for a fee.

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Contribute as much as you can

As of 2024, the IRS allows savers to contribute up to $23,000 annually to their 401(k) plan. If you have room in your budget to hit that limit, your retirement nest egg could grow at a fast clip.

But even if you contribute much less than the maximum, you can still make significant strides toward your retirement savings goals. Take a close look at both your spending and retirement goals to determine how much you can reasonably set aside for your future.

Take advantage of catch-up contributions

In 2024, savers who are at least 50 can make catch-up contributions of up to $7,500.

If you meet the age requirements and have the funds available, this opportunity to save more could help you stockpile additional funds as retirement approaches.

Increase your contributions over time

It’s natural to contribute less to your 401(k) when you are starting your career and are earning less. But as your career progresses, you should see your salary rise.

Make the most of your extra income by increasing your 401(k) contributions at a steady pace. For example, you might commit an additional 1% of your earnings to your 401(k) each year.

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Make sure your investments match your goals

When you contribute to a 401(k), the money will likely default into a cash settlement account that pays a modest interest rate. If you are exceptionally risk-averse, you might be happy to leave the money there.

However, most investors want to see their funds grow substantially over time, which often means investing the money in stocks or bonds.

At the end of the day, no one answer is right for everyone. Make sure you invest your funds into assets aligning with your financial goals and risk tolerance.

If you're unsure of the right approach, consider consulting with a financial advisor who can offer guidance.

Watch out for high fees

Many people who invest through a 401(k) are unaware of the fees and other expenses they pay. Over time, these costs can severely damage their retirement accumulation.

So, make sure to read the fine print so you avoid paying unnecessarily high fees. Seeking low-cost investments can help you make the most of your investment portfolio. This is another matter where a financial advisor can offer important help.

Avoid borrowing from your 401(k)

It can be tempting to borrow money from your 401(k) throughout your savings journey. But it’s generally a bad idea to tap into your 401(k) funds before hitting your golden years.

You might owe taxes and penalties if you withdraw these funds too early. In addition, taking money out of your 401(k) means that cash is no longer compounding and contributing to creating a bigger nest egg.

A better way to prepare for unexpected expenses is to build up an emergency fund that you can turn to when you need money fast.

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SoFi has no account or overdraft fees⁵ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage. and additional FDIC insurance up to $2 million on deposits is available through a seamless network of participating banks.⁶ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at <a href="http://sofi.com/legal/banking-fees/">sofi.com/legal/banking-fees/</a> ⁷ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a> Plus, you can receive your paycheck up to 2 days early.⁸ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

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SoFi is a Member, FDIC. ⁷ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/terms">SoFi.com/banking/fdic/terms</a> See list of participating banks at <a href="http://sofi.com/banking/fdic/receivingbanks">SoFi.com/banking/fdic/receivingbanks</a>

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Bump up your contributions when you get a bonus

If you receive a bonus from your employer, consider directing at least some of those funds into your 401(k).

While it’s tempting to spend your bonus on more immediate financial concerns, earmarking a part of your bonus check for retirement can help you build a brighter financial future.

Don’t cash out your 401(k) when you switch jobs

When you leave an employer, you likely can cash out your 401(k), roll it over to a new account or IRA, or keep the account just as it is.

Cashing out your 401(k) is tempting, but it often means paying taxes and penalties that reduce the size of your savings. It will also mark a significant setback in your retirement savings efforts.

Keep contributing, even during bear markets

The stock market is volatile. If you choose to invest your 401(k) money in stocks, mutual funds, or exchange-traded funds, prepare to experience some big ups and downs while saving for retirement.

Volatility is part of the investing process. Experts typically recommend staying the course right through a bear market and continuing to invest.

However, if you think a bear market might tempt you to stop investing, consider readjusting your portfolio allocation so it more closely matches your risk tolerance.

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Bottom line

A 401(k) can be a great tool to help you prepare for retirement. But a tool is only helpful if you know how to use it.

Learn more about your 401(k) so you can create a strategy to maximize the potential of this tax-advantaged retirement account.

As you save, evaluate your budget to see if you can find more money to set aside. Making small spending cuts now to increase your investments might pay off in a big way down the line.

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