3 401(k) Moves to Make Right Away in 2022

If your employer provides access to a workplace 401(k), you’re in luck. You have one of the simplest tools available to help you invest for your later years because you can sign up to have money withdrawn directly from your paycheck to make investments. And the contribution limits on 401(k)s are much higher than on most other tax-advantaged retirement plans.

But it’s up to you to make the most of your account. And if you want to do that this year, there are three simple 401(k) tasks you should check off your to-do list ASAP in 2022.

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1. Confirm your employer matching rules

If you have a 401(k) and your employer offers a match, you should be earning the full match if it’s possible in any way to do so.

A 401(k) match is free money. Depending on your plan, your employer may contribute a specific percentage of the amount you invest. And some employers match 100% of contributions up to a certain income threshold, which could mean an instant 100% return on your money.

You must know the rules for claiming this free cash, though. Many employers limit the amount they’ll match per month, so if you want to max it out, you’ll have to invest enough in your 401(k) all year long in order to do so.

That’s why you should review matching rules as early as possible in each new year so you understand exactly what to do to get all the help your company is willing to offer.

2. Review your automated contributions

Generally, 401(k) contributions are taken from your paychecks automatically. But you don’t necessarily want to stick with the status quo of having the same auto withdrawals made each year. Unless you’re already investing around 15% to 20% of your income, ideally you’ll increase the amount of automated contributions made annually until you hit this milestone.

One of the easiest ways to increase your investments is to divert your raise directly to your 401(k). If you got a 2% salary bump this year and were contributing 8% of income to your account in 2021, consider bumping that up to 10% — or at least 9% — in 2022. If you start contributing the extra money to your retirement account before you get used to the salary increase, you’ll never miss it.

Even if you don’t get a raise, try to tick up your contribution amount by a percentage or two. You may find that over the course of the year, sending an extra 1% of your money to your investment account doesn’t make much of a difference in your day-to-day living — but it can make a huge impact on your retirement account balance over time.

3. Review your asset allocation

Finally, you’ll want to revisit your portfolio each year to confirm you have a diverse mix of investments and that you’re exposed to the right level of risk.

Your portfolio balance can change over time, as some investments outperform others. This can leave you too heavily concentrated in a particular type of asset. You want to avoid this. And as you get older and have less time to recover from losses before you must begin making withdrawals, you’ll also want to shift an increasing percentage of your portfolio to safer investments.

That’s why it’s such a good idea to review your asset allocation each year. Chances are you’ll need to make some modifications in your investment mix to ensure you have the right portfolio for your current needs.

By taking each of these three steps, you can put as much money as possible into your retirement account and maximize potential returns while minimizing the risk of loss. It’s well worth taking a few minutes to make that happen.

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