How To Take Control of Your 401(k), According to Financial Experts

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Delmaine Donson /

If you have a 401(k), congratulations! Not only are you saving for retirement, but you’re doing it consistently and in a tax-advantaged account. Also, if an employer match is part of your benefits package, then you’re saving for the future with someone else’s money, which is always a good deal.

But that doesn’t mean you’re getting the most bang for your tax-deferred buck. A few smart adjustments made today could put your future self in a much better position to retire in style down the road. With 2023 in full swing, it’s time to ask — is your 401(k) plan ready for the new year and beyond? Follow these tips to find out.

Look Back to 2022 for Guidance in 2023

Now is the time to take inventory of the year that just passed, but not to dwell on any losses you suffered or to revel in your gains. 

“I think it’s a good idea to use the beginning of each year to look at our overall retirement picture,” said Jason Laux, owner and retirement advisor at Synergy Group. “How far out are we from retirement? How much risk is in our portfolio relative to your proximity to retirement? That evaluation lets us look at our retirement accounts to see how the performance was last year, but we don’t just want to take last year’s winners.”

Instead, according to Laux, the objective is to analyze what worked and what didn’t in 2022 to make the best decisions possible for 2023.

Are You Retirement Ready?

He went on to say that factors like expectations about a continued bear stock market and further interest rate hikes from the Fed could spur employees to adjust their 401(k)s accordingly. 

Same as Ever: Get the Maximum Company Match

If matching employer funds are part of your retirement benefits, you have an incredible advantage over freelancers languishing in IRA-land. Don’t take it for granted — even if you don’t love your job — and whatever you do, take advantage of the opportunity while it lasts. 

“A 401(k) match is the closest thing to free money that exists,” said Charles H. Thomas III, CFP, a financial advisor and founder of Intrepid Eagle Finance. “Not everyone is fortunate enough to have a match so don’t let it go to waste if you have that valuable benefit. Make a goal to save enough to get the full match.”

If you had to lower your contributions to make ends meet during the endless months of rising inflation, that’s certainly understandable. Retirement, after all, is less immediate than tomorrow. But try to get back to the maximum as soon as you can. 

“It has been a challenging time for many people, and some are starting to get back on their feet,” said Shawn Plummer, CEO of The Annuity Expert. “People who are not already contributing enough to get their employer match should target to do so to increase their 401(k) plans. The employer match can add up to a significant amount of money, especially when you consider compound interest.”

Set It and Forget It With a Target-Date Fund

Retirement planning can be confusing and overwhelming. Do yourself a favor and eliminate as many variables as possible. 

Are You Retirement Ready?

“The best thing people can do for their 401(k) is keep it simple,” said John Eringman, known to his 1.3 million TikTok and Instagram followers as @johnefinance. “Your 401(k) will likely have more than a dozen funds to pick from. Don’t get overwhelmed. My recommendation is to stick with one simple target-date fund. A target-date fund is the ‘set it and forget it’ choice within 401(k)s.”

Thomas describes target-date funds as “set it and forget it” because they adjust your holdings on your behalf as your timeline draws nearer. 

“It puts you into more risky stocks while you’re young, and automatically shifts towards more conservative bonds as you grow older,” Eringman said. “If you plan to retire in 2050, choose the ‘2050 Target Date Fund.'”

In summation, especially for novices, Eringman concludes with this: “So, if you’re just starting your 401(k), make it simple, make it easy, and make it automatic. Set it and forget it in a target-date fund and retire wealthy.”

Eliminate Fees Wherever You Can

Fees gnaw away at gains over time. Avoid giving money away by rooting out hidden expenses in your retirement plan.

“Understand the funds you’re investing in by speaking to your plan administrator and find out whether there are alternatives with lower fees,” Plummer said. “If you’re switching jobs… check the difference in fees between your existing 401(k) plan and your new one. If your existing plan has significantly more low-fee choices, you might want to keep it.”

Are You Retirement Ready?

Even within the same plan at the same job, you might find a fund that does the same thing your current fund does, but at a lower cost — like a generic version of prescription medication. 

“Evaluating our portfolio lets us look at the fee for each fund,” Laux said. “If there are two similar funds in our plan and they’re performing about the same, but one costs more, we might want to consolidate to the one with less expensive fees.”

When Money’s Tight, Forget Your 401(k) Exists

These have been difficult years, but barring imminent doom, do not borrow money from your 401(k).

“We are still in uncertain times, and some people may encounter a situation where they’re in desperate need of cash,” Plummer said. “If you can, explore other options first and cash out or take loans from your 401(k) plan only as a last resort. You can’t make more contributions until you repay your loan and cashing out your plan will result in a 10% withdrawal penalty and taxes.”

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