Whether you're on the verge of retirement or decades away, growing your 401(k) balance is one of the best ways to improve your financial security over the long term. But it's often easier said than done. A lot of people don't have extra cash to spare, and many find the rules of 401(k)s confusing.
Because of this, it's not always easy to figure out where you should focus your attention when trying to grow your 401(k) wealth. The three moves below are a great place to begin if you're ready to maximize your savings growth in 2025.
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1. Claim a 401(k) match if you're eligible for one
Not all employers offer 401(k) matches, but if yours does, you probably want to put your retirement savings here before anywhere else. The only exceptions to this would be if you cannot afford to have any money withheld from your paychecks or if you're not vested in the plan and don't plan to remain with the company long enough to become fully vested.
Every company has its own matching formula, but these matches are often worth a few thousand dollars. For example, if your company gives you a dollar-for-dollar match on the first 3% of your income and a $0.50-on-the-dollar match for an additional 2% of your income, that would give you an extra $2,400 for retirement if you earn $60,000 per year on top of the $3,000 you set aside for yourself.
That's already a nice chunk of money, but it's even more impressive when you consider how much that savings could grow after it's been invested. After 20 years, that single $2,400 match would be worth over $11,186 if you earned an 8% average annual return. And if you consistently claimed matches every year, you could potentially have six figures in company-matched funds and associated earnings by retirement.
2. Review your investments and update them as needed
Sometimes, increasing your 401(k) balance is as simple as changing your investment options. Your goal is to choose investments that enable you to minimize risk by diversifying your savings while maximizing gains. Part of the latter involves reducing how much you pay in investment fees.
Most 401(k)s don't give you a ton of investment options from which to choose. You'll normally have a selection of mutual funds your employer has chosen. Many of these will be target-date funds, which adjust their asset allocation to match the risk tolerance of someone retiring in the target year. These can be good options for those looking for hands-off investments, but they can charge high fees.
You may prefer to invest in an index fund instead. These are composed of hundreds of investments designed to mimic the performance of a market index, like the S&P 500. They're some of the most affordable investments you can find, and they help you diversify your portfolio with a single investment.
3. Take advantage of catch-up contributions if you can
Adults 50 and older are eligible to make catch-up contributions to their 401(k)s. These are additional contributions they can make beyond the standard contribution limit. Of course, this requires you to have extra money to make more contributions. But if you do, this can be a great way to make up for lost time.
Adults under 50 may contribute up to $23,500 to a 401(k) in 2025. Those 50 to 59 and 64 and older may contribute up to $31,000. Beginning in 2025, those who will be 60 to 63 by the end of the year are eligible to make an even larger catch-up contribution, bringing their maximum contribution to $34,750.
You don't have to do anything special to make these catch-up contributions. Just continue to defer money into your 401(k) as you normally would. Be careful not to exceed the applicable contribution limit, though, or you could face tax penalties.
The beginning of a new year is a great time to make these changes to your 401(k), but this isn't something you should only do once. Review your investment strategy at least annually or whenever you experience a major financial change, like the birth of a new family member or a job change. Making small adjustments now is much easier than trying to make bigger adjustments on the verge of retirement.
