Making the most of an employer-sponsored 401(k) plan is a cornerstone of retirement planning. These plans allow for tax-deferred growth and long-term compounding. Often, an employer will match contributions up to a certain percentage.
Retirement investors can build a nest egg by consistently contributing the annual maximum while reducing their taxable income.
Here are 10 ways to maximize your 401(k) account.
— Save more than your employer’s automatic savings rate.
— Get a 401(k) match.
— Stay until you are vested.
— Maximize your tax break.
— Diversify with a Roth 401(k).
— Don’t cash out early.
— Roll over without fees.
— Minimize fees.
— Diversify your assets.
— Remember required minimum distributions.
Save More than Your Employer’s Automatic Savings Rate
Many employers automatically enroll workers in a 401(k) plan at a fairly low contribution rate, such as 3%.
However, that amount is rarely enough to retire comfortably, according to Bill London, an estate attorney and founder of Kimura London & White in Irvine, California.
Investors should consider increasing their contributions annually or as they receive raises, he said in an email.
“Aside from speeding the accumulation of your savings, it, from an estate planning perspective, builds an enhanced economic foundation that can support both your retirement requirements and any legacy you would like to leave for your heirs,” he said.
Get a 401(k) Match
If your organization has a 401(k) plan that includes an employer match, contributing at least as much as the match can easily double your savings.
“There are not many opportunities to instantly realize a 100% increase in savings than via an employer match,” said David Freisner, CEO at Konza Global Wealth Group in Overland Park, Kansas, in an email.
Most 401(k) plans include automatic enrollment with an employee contribution percentage set to be equal to or higher than the employer match. As long as an employee continues to participate without opting out, their savings will be doubled to the rate of the match.
Stay Until You Are Vested
Before leaving your job, it’s essential to fully understand your 401(k) vesting schedule.
“Leaving early instead of waiting for vesting causes forfeiture of some or all employer funds,” London said. “This is money that might have earned interest for 20 years or become part of the total amount reserved for beneficiaries.”
In the realm of estate planning, relatively small decisions may have a lasting impact, he added. Leaving a job before your 401(k) funds are vested may cost you tens of thousands of dollars over time.
Maximize Your Tax Break
In 2025, the maximum 401(k) contribution for employees under 50 is $23,500, with a catch-up contribution of $7,500 for those age 50 and older. For workers between ages of 60 and 63, the limit is $11,250.
A traditional 401(k) is funded with pretax dollars. Growth accumulates tax-free until it’s time to make withdrawals.
“Tax breaks are like the government’s way of telling us all what is important for society,” said Douglas Ornstein, director and wealth management coach at TIAA in Charlotte, North Carolina, in an email.
Incentives like tax breaks in 401(k)s or other qualified vehicles like 403(b)s and individual retirement accounts can be huge, he added.
Diversify with a Roth 401(k)
A Roth 401(k), funded with after-tax money, can be part of a tax-diversification strategy.
These accounts allow for tax-free withdrawals in the future. This benefit becomes especially valuable for those expecting higher tax rates in retirement, London said.
“Importantly, Roth assets can be passed to beneficiaries without triggering immediate income tax obligations, thus making them a critical element of multigenerational estate planning,” he added.
Don’t Cash Out Early
When you need some extra money but don’t have a way of quickly generating cash, it can be tempting to take from your 401(k).
If you’re under 59 1/2, an early withdrawal will cost you not only in taxes on the income, but also in the form of a 10% penalty.
“More important, it undercuts your long-term financial security. In planning your estate, the preservation of retirement assets leaves you in control of more assets, thus allowing you to cover future needs and increase the size of your legacy,” London said.
Roll Over Without Fees
Investors are often confused about the process of rolling over a 401(k) into an IRA or another 401(k) plan when leaving a job.
“Most companies allow you to roll over without any fees or penalties to another retirement account,” Ornstein said.
That’s different from cashing out, which triggers taxation and possibly penalties.
In addition to the Internal Revenue Service keeping its hands off your money in a rollover, brokerages provide that service at no charge.
Minimize Fees
Your plan’s 401(k) choices generally include numerous funds with various baked-in expense ratios. For example, an actively managed mutual fund will typically have a higher fee than a fund that simply tracks an index.
“Find investment options with low costs. Stocks do not have fees, but ETFs, mutual funds and the custodians who hold your funds do,” said Marcus Sturdivant Sr., managing member of the ABC Squared in Indian Trail, North Carolina, in an email.
“Read the fine print,” he added.
Diversify Your Assets
Most American investors tend to invest heavily in domestic stocks, a practice called home country bias. That tilt toward large-cap U.S. stocks has paid off for many years, as that asset class trounced others.
However, in 2025, international ETFs, such as the iShares MSCI EAFE ETF (ticker: EFA), are the outperformers.
“Diversification is more important now than ever,” Ornstein said. He cited the importance of diversifying across categories such as asset classes, investment style, tax treatment, geography and company size.
One common mistake investors make is believing that holding funds at different brokerages is a way of spreading assets across different categories.
“Diversification happens within your account, but diversifying across investment firms doesn’t accomplish the same thing since your investments won’t be coordinated with each other,” Ornstein said.
“You want your investment portfolio in total to be like a well-balanced diet. All things in moderation, with a bigger focus on the healthiest investments,” he added.
[Related:Ask a Financial Pro: Should I Add Foreign Investments to My Retirement Portfolio?]
Remember Required Minimum Distributions
When retirement savers turn 73, they are required to begin withdrawing from their traditional 401(k) and IRAs.
“Failure to comply can lead to steep penalties,” London said.
In addition, those who don’t make timely required minimum distributions, or RMDs, may also hurt their estate planning in terms of tax rates and the amount left for heirs.
“Therefore, it is important to incorporate the RMD into an overall financial and estate plan in order to minimize taxes and protect the person’s inheritance,” London said.
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10 Strategies to Maximize Your 401(k) Balance originally appeared on usnews.com
Update 06/10/25: This story was published at an earlier date and has been updated with new information.
