Maximize Contributions: Take advantage of higher contribution limits. In 2025, you can contribute up to $23,000, plus a $7,500 catch-up contribution for those 50+, totaling $30,500. If your employer offers a match, ensure you contribute enough to get the full match.
Diversify Investments: Spread your 401(k) across asset classes (stocks, bonds, cash) to reduce risk. Consider target-date funds or balanced funds for automatic diversification, but review their fees and glide paths to ensure alignment with your goals.
Adjust Risk as Retirement Nears: Shift toward more conservative investments, such as bonds or stable value funds, to protect your savings from market volatility. Keep some growth-oriented assets like stocks to combat inflation over a 20'30-year retirement.
Minimize Fees: High fees can erode returns. Look for low-cost index funds or ETFs in your 401(k) plan.
Avoid Early Withdrawals: Withdrawing funds before age 59' incurs a 10 percent penalty plus taxes, significantly reducing your saving
Consider Roth 401(k) Options: If your plan offers a Roth 401(k), contributions are after-tax, but qualified withdrawals are tax-free. This can be beneficial if you expect to be in a higher tax bracket in retirement or want tax-free income.
Rebalance Regularly: Market fluctuations can skew your asset allocation. Rebalance your portfolio annually or when allocations drift from 5'10 percent off target.
Plan for Required Minimum Distributions (RMDs): RMDs begin at age 73 (or 75 if born after 1959).
Protect Against Inflation: Include assets like TIPS (Treasury Inflation-Protected Securities) or dividend-paying stock funds to help your savings keep pace with rising costs over decades.
Consult a Financial Advisor: A fee-only fiduciary advisor can help tailor your 401(k) strategy to your retirement goals, Social Security plans, and other savings. Avoid advisors pushing high-commission products.
Stay Disciplined: Avoid panic-selling during market downturns. Historically, markets recover over time, and staying invested prevents locking in losses.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
