Maximizing Retirement Savings: Half-Year 401(K) Contributions

401K plans are designed for the long term and shouldn't be touched for decades. Investing in a 401K for only half a year may not be the best idea, as market risk is always present and short-term noise can mess up long-term gains. However, maxing out a 401K can be beneficial due to higher contribution limits compared to IRAs. It's important to consider fees and stay on autopilot with regular contributions and wise investments.

Market Risk: All investments are subject to market risk, including the possible loss of principal

All investments are subject to market risk, including the possible loss of principal. The principal value of target date investments is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire. These investments typically invest in a broad range of underlying portfolios that include stocks, bonds, and short-term investments and are subject to the risks of different areas of the market. In addition, the objectives of target date investments typically change over time to become more conservative.

401K is a retirement savings plan offered by employers that allows employees to contribute a portion of their salary on a pre-tax basis. You don’t pay taxes on the money until you withdraw it—usually in retirement. This tax advantage makes the 401K extremely popular across all industries, especially for high-income earners.

401K is designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains.

98% of retirement plans offer target date investments, and they are often set as the default option. Target date investments are goal-oriented and automatically adjust your risk level over time. In addition, 87% of plans allow investors to automatically increase contribution percentages periodically, with nearly half of those plans setting auto-increase as the default.

Before you jump ship, you can try talking to your employer to see if it will offer a wider range of investment options for you to choose from. It's probably worth sticking with your 401(k) because of the higher contribution limits compared to IRAs. You can contribute up to $23,500 to a 401(k) in 2023 ($23,000 in 2024), or more if you are 50 or over and eligible for catch-up contributions.

Fees: Look into what your 401(k) charges in fees

401K fees are an important consideration when you are evaluating your investment options. 98% of retirement plans offer target date investments, and they are often set as the default option. Target date investments are goal-oriented and automatically adjust your risk level over time. 87% of plans allow investors to automatically increase contribution percentages periodically, with nearly half of those plans setting auto-increase as the default.

Fees are a key factor to consider when you are evaluating your investment options. When you invest in a 401K, you don't pay taxes on the money until you withdraw it—usually in retirement. This tax advantage makes the 401K extremely popular across all industries, especially for high-income earners.

Before you jump ship, you can try talking to your employer to see if it will offer a wider range of investment options for you to choose from. It's probably worth sticking with your 401(k) because of the higher contribution limits compared to IRAs. You can contribute up to $23,500 to a 401(k) in 2023 ($23,000 in 2024), or more if you are 50 or over and eligible for catch-up contributions. Those total $7,500 in 2024 and 2025, but employees ages 60 to 63 have a larger catch-up contribution of $11,250 in 2025. The annual contribution limit for IRAs is just $7,000 in 2024 and 2025. Those who are 50 and older can contribute $8,000 in both years thanks to catch-up contributions.

All investments are subject to market risk, including the possible loss of principal. The principal value of target date investments is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire. These investments typically invest in a broad range of underlying portfolios that include stocks, bonds, and short-term investments and are subject to the risks of different areas of the market. In addition, the objectives of target date investments typically change over time to become more conservative.

401Ks are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains. One of the best things about a 401K is just how easy it is to get started.

Long-Term Goals: 401Ks are designed for the long, looooong haul

401K plans are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains.

401K plans are retirement savings plans offered by employers that allow employees to contribute a portion of their salary on a pre-tax basis. You don’t pay taxes on the money until you withdraw it—usually in retirement. This tax advantage makes the 401K extremely popular across all industries, especially for high-income earners.

401K plans are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains.

401K plans are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains.

401K plans are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains.

Employer Options: Talk to your employer to see if it will offer a wider range of investment options

401K plans are retirement savings plans offered by employers that allow employees to contribute a portion of their salary on a pre-tax basis. You don’t pay taxes on the money until you withdraw it—usually in retirement. This tax advantage makes the 401K extremely popular across all industries, especially for high-income earners.

98% of retirement plans offer target date investments, and they are often set as the default option. Target date investments are goal-oriented and automatically adjust your risk level over time. In addition, 87% of plans allow investors to automatically increase contribution percentages periodically, with nearly half of those plans setting auto-increase as the default.

Before you jump ship, you can try talking to your employer to see if it will offer a wider range of investment options for you to choose from. It's probably worth sticking with your 401(k) because of the higher contribution limits compared to IRAs. You can contribute up to $23,500 to a 401(k) in 2023 ($23,000 in 2024), or more if you are 50 or over and eligible for catch-up contributions. Those total $7,500 in 2024 and 2025, but employees ages 60 to 63 have a larger catch-up contribution of $11,250 in 2025. The annual contribution limit for IRAs is just $7,000 in 2024 and 2025. Those who are 50 and older can contribute $8,000 in both years thanks to catch-up contributions.

All investments are subject to market risk, including the possible loss of principal. The principal value of target date investments is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire. These investments typically invest in a broad range of underlying portfolios that include stocks, bonds, and short-term investments and are subject to the risks of different areas of the market. In addition, the objectives of target date investments typically change over time to become more conservative.

401Ks are designed for the long, looooong haul. If you’re part of Generation X or Y, you’ve got decades until you’ll need to touch this money. The best thing you can do? Stay on autopilot—contribute regularly, invest wisely, and forget about it for a while. Don’t let short-term noise mess up your long-term gains. One of the best things about a 401K is just how easy it is to get started.

Target Date Investments: 98% of retirement plans offer target date investments

98% of retirement plans offer target date investments, and they are often set as the default option. Target date investments are goal-oriented and automatically adjust your risk level over time. In addition, 87% of plans allow investors to automatically increase contribution percentages periodically, with nearly half of those plans setting auto-increase as the default.

Target-date funds are the default plan of choice for many providers of employer-backed retirement plans such as 401(k) accounts. They offer exposure to a variety of markets, active and passive management, and a selection of asset allocation. Despite their simplicity, investors who use target-date funds need to stay on top of asset allocation, fees, and investment risk.

In 2023, 64% of retirement contributions were invested in target-date funds, up from 59% in 2022, according to Vanguard. Target-date funds have become a default option for many employer-sponsored 401(k) plans. The Pension Protection Act of 2006 helped employers develop retirement plans and set up automatic enrollment, making target-date funds an easy option for retirement plans with their low fees and diversified portfolios.

As your retirement year approaches, the fund gradually shifts toward more bonds, money market accounts and other lower-risk investments. Your retirement year is the "target date" of most of these funds, and the funds are conveniently named to correspond with your planned retirement year. For example, a fund may begin with a heavy mix of domestic and global equity funds making up 90% of the total investment. But by retirement, equity funds make up only 30% of the total investment, while fixed-income investments such as bonds and short-term funds make up the rest.

All investments are subject to market risk, including the possible loss of principal. The principal value of target date investments is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire. These investments typically invest in a broad range of underlying portfolios that include stocks, bonds, and short-term investments and are subject to the risks of different areas of the market. In addition, the objectives of target date investments typically change over time to become more conservative.

Frequently asked questions