More than half of Americans feel they just aren’t saving enough for retirement, according to a 2023 Bankrate survey. But for those who have fallen behind, it’s always a great time to examine your 401(k) plan and get moving on ways to set you up for greater wealth and financial security in your golden years.

A 401(k) is an employer-sponsored account that allows you to defer the taxes on your investments until retirement, meaning you can roll up more money faster. As a bonus, many employers contribute matching funds to encourage you to save, offering you free money for something that is already good to do. (Here’s Bankrate’s complete guide to 401(k) plans.)

“The biggest mistake one can make is not saving for retirement at all,” says Kevin Driscoll, vice president of investment services at Navy Federal Financial Group. “If you’re not investing in your retirement at all, you’re leaving money on the table. Anyone can take control of their finances – it just requires proactive effort.”

Bankrate spoke with a number of financial experts to break down the top ways to set up your 401(k) to thrive in 2024 and beyond.

5 smart moves to maximize your 401(k)

Investing can be difficult, but the 401(k) is one of the easiest ways to start investing, and it’s one of the best ways for Americans to save for their golden years. Many of the actions below focus on small changes, and then you can let stocks do what they do best, go up over time.

1. Act now

The best advice according to experts is to resolve to act now, even if your contributions are modest. Many workers set up or adjust their retirement plans as the new year begins, but you can set up or adjust your plan at any time.

The new year makes a perfect time to re-evaluate your retirement needs, and you can assess whether you’re getting the most from your 401(k) plan. It may be time to adjust a portfolio that’s too conservative into one that’s more aggressive, or simply to start contributing to a plan.

One of the biggest regrets that Americans have is not saving early enough for retirement, according to a 2023 Bankrate survey.  To avoid those regrets later, it’s vital to act now.

The more time you give your money to grow, the higher your returns are likely to be over time. Act today to get your 401(k) in order or to start investing. Bankrate’s 401(k) calculator can help you see where your savings stand.

2. Take full advantage of your company’s match

“To get started on a tangible level, take a look at your company’s 401(k) options,” says Driscoll. “Many companies offer an incentive match, encouraging you to invest part of your paycheck into a retirement fund. Whatever they match, put that percentage into your retirement fund – it’s free money.”

The incentive match is one of the best parts, maybe the single best, of the 401(k) plan. And the employer match is the easiest, safest money you could ever make, offering you an immediate return for doing what you need to do anyway.

Many employers will match 50 percent of your contribution and sometimes as much as 100 percent up to a certain amount. A few employers do even better than that, although many employers do not offer a match at all. If there’s a catch, it’s that many employers require you to stay with the company for at least a year for the match to fully vest, though some don’t.

“Ensure you have contributed enough to get the full company match,” says Kirk Kinder, certified financial planner at Picket Fence Financial in Bel Air, Maryland. “There isn’t any legit reason not to get the full match.”

3. Get more aggressive

If you have a long time until you retire, you’re probably going to be better off having a portfolio that’s more aggressive. That means your portfolio will likely have more stocks in it and fewer fixed-income investments such as bonds and CDs. In fact, if you’re more than a decade away from retirement, it could be a huge mistake to be too conservative.

Over time, a diversified portfolio of stocks generally returns more than a typical bond portfolio. The Standard & Poor’s 500 index has gained an average of about 10 percent annually for decades. And with many retirees living longer than ever, they’re going to need to ensure their investments provide a high rate of return.

Many 401(k) plans have target-date funds that automatically shift your aggressive assets into safer ones as you approach your retirement date. These target-date funds can be a good solution for investors who don’t want the hassle and headache of managing their own portfolio.

“I’m a big fan of target-date funds,” says Mark Wilson, founder and president at MILE Wealth Management in Irvine, California. “Most of these are well-diversified, wisely built, and auto-rebalanced. Unfortunately, I often find that they are too conservative.”

“Nobody needs all of their nest eggs on the day they retire, so why would you have 20 percent (or less) of your investments in stocks on the day you retire,” asks Wilson. “Retirees have a long horizon and will need to have some stocks to keep ahead of taxes and inflation.”

Wilson recommends using a target-date fund that’s 10-15 years longer than when you expect to retire, because it will have a greater allocation to stocks. For example, if you would normally take a 2040 target-date fund, consider a 2050 or 2055 one instead. The extra years on the fund should help you generate a higher return and better maintain your standard of living.

4. But avoid being too aggressive

If you have a long time horizon, it can be smart to get aggressive with your portfolio, but those closer to retirement should be careful, too. For retirees and near-retirees, it may be time to shift into preserving your assets rather than trying to play catch-up.

“Yet many are focused on growing their assets – including aggressive investment strategies – rather than preserving their assets against sudden market downturns,” says David Potter, former spokesperson for MassMutual Financial, citing the company’s research. “Many people may be taking more risk than they realize.”

Potter suggests that investors reevaluate their portfolio regularly to consider how they would fare if the market declined significantly.

“Typically, financial professionals recommend that retirement savers dial back their exposure to stocks as they get within five years of retirement and within the first five years after retiring,” he says. ”A steep market downturn of 20 percent or more during those periods could irreversibly reduce your income in retirement.”

5. Consider rebalancing

The various positions in a portfolio grow at different rates, and over time the portfolio can deviate from its target allocation. Investors should look at their portfolios to see if they need to be rebalanced. Rebalancing returns the 401(k) from its current allocation to its target allocation.

For example, if your target allocation was 50 percent bonds and 50 percent stocks, it may have grown to 40 percent bonds and 60 percent stocks over the last few years as stocks soared. By rebalancing, investors can sell some of their appreciated assets and buy underperforming assets, effectively selling high and buying low.

How much should you contribute to your 401(k)?

Deciding how much to contribute will depend on your unique circumstances. You’ll likely want to contribute enough so that you can receive any match offered by your employer. As mentioned above, this is like free money.

But you don’t need to limit contributions to the amount required to get the match. In 2024, employee contribution limits for a 401(k) plan are set at $23,000, up from $22,500 in 2023. The more you can contribute early on in your career, the better off you will be when retirement time comes.

Think about opening a Roth 401(k)

If you’re looking ahead a few years, you may also want to consider opening a specific type of 401(k) called a Roth 401(k). With the Roth version, you fund with after-tax money, but you’re able to enjoy tax-free withdrawals at retirement. (Here are all the details on the Roth 401(k).)

Tax rates are relatively low, so now could be a good time to fund a Roth 401(k) rather than a traditional 401(k).

“With the Trump tax law due to sunset in 2025, we are facing higher rates in the future,” says Kinder. “It could be an excellent time to utilize the Roth 401(k) option and take advantage of the lower rates now. This is especially true for folks under [age] 40 or folks in the 10 percent or 12 percent tax bracket.”

Lower tax rates mean that the cost to take advantage of the Roth plan is lower, since you fund it with after-tax money. Taxpayers in higher brackets may find their break on current taxes is more advantageous, however, and stick to the traditional 401(k) plan.

This Bankrate calculator can help you decide whether the traditional 401(k) or Roth 401(k) is better for you.

Bottom line

The 401(k) is an excellent vehicle to save for retirement, and it’s a great time to join the many other workers who are securing their financial futures by saving and investing. Many of the top moves to make are easy and painless, and some even reward you with a bonus for your effort.

— Bankrate’s Brian Baker contributed to an update of this story.