5 Ways to Squeeze Every Last Penny Out of Your 401(k) | Personal Finance

June 21, 2021

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2. Max out your contribution limits

Another advantage of the 401(k) is that it has higher contribution limits than many other accounts. For 2021, the maximum amount you can contribute to your 401(k) is $19,500 per year (or $26,000 per year for those age 50 or older). By comparison, IRAs have annual contribution limits of just $6,000 per year, or $7,000 per year for those 50 or older.

Not everyone can afford to max out their 401(k), but try to contribute as much as possible. The more you're able to save now, the better off you'll be in retirement.

3. Set up automatic transfers

Because your 401(k) is tied to your employer, many plans allow you to transfer a portion of each paycheck directly to your account.

By setting up automatic transfers, it may be easier to keep your savings on track. This money goes straight to your 401(k) without ever reaching your bank account, which can make it easier to save before you have the chance to spend it.

Also, automatic transfers can help make saving part of your monthly budget. When you know that a certain amount of money is going to your 401(k) each month, it's easier to build those savings into your budget rather than simply investing whatever money you have leftover at the end of the month.