401(k) Optimization

Move beyond default enrollment and optimize your 401(k): capture the full match, choose the right contribution type, select the right funds, and use tax strategy intelligently.

24 action items~20 min to complete4 sections

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🎁 Capture the Full Employer Match 🔀 Choose Traditional vs. Roth 401(k)📊 Select the Right Investment Funds 🚀 Advanced Optimization

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Capture the Full Employer Match

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Find your employer's exact match formula in your benefits documentationKey

Calculate the contribution percentage required to capture 100% of the matchKey

Confirm your current contribution percentage meets or exceeds the match thresholdAction

Calculate the annual dollar value of employer match you're currently receiving

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$23,000

2024 annual 401(k) employee contribution limit ($30,500 if age 50+)

$1.4T

Total employer matching contributions forfeited annually by non-participating employees

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Choose Traditional vs. Roth 401(k)

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Understand traditional 401(k): contributions are pre-tax, withdrawals are taxed

Understand Roth 401(k): contributions are after-tax, withdrawals are tax-freeKey

Consider income tax bracket as primary decision factor

Consider a split contribution (some traditional, some Roth) for tax diversification

Don't let the decision paralyze action — starting and adjusting later beats waitingWatch out

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Select the Right Investment Funds

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Review all fund options available in your planAction

Identify the expense ratios for each fund you're consideringKey

Choose low-cost index funds over actively managed fundsKey

Look for total market index, S&P 500 index, and international index options

If using a target-date fund, verify its expense ratio is below 0.15%

Avoid company stock concentration above 10% of your portfolioWatch out

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Advanced Optimization

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Max out contributions ($23,000/year in 2024) if financially feasible

Add catch-up contributions if 50+ ($30,500 total in 2024)

Set up automatic 1% annual contribution increaseAction

Review your plan's investment options annually — menus change

Know when your employer's match vestsWatch out

Evaluate Backdoor Roth OptionKey

Understand Pro-Rata RuleWatch out

Consider Spousal IRA

Understand IRA Rollover RulesWatch out

Evaluate Mega Backdoor Roth

Explore spousal step-up planning opportunitiesKey

Evaluate direct indexing for tax-loss harvestingAction