The 401(k) has gotten a lot of attention lately — much of it bad.
But amid a string of lawsuits brought by employees who think their plans are unfairly expensive and a debate about whether the 401(k) has adequately replaced the pension, it’s important to remember one thing: If you’re fortunate enough to have one of these plans — and about a third of workers are not — it’s almost certainly the best option you have to save for retirement.
That’s because 401(k) contribution limits are among the highest of any tax-advantaged retirement account, set at $18,000 a year in 2017, with an additional $6,000 catch-up contribution for those 50 or older. Those contributions also frequently trigger an employer match.
That doesn’t mean you shouldn’t work to make the most of it, though, and that work doesn’t stop when you make your monthly contribution. Here’s what you can do to maximize the benefit you get from your 401(k).
Escalate your contributions
If your brain is saving’s worst enemy — it would, in many cases, much rather spend — automation is its best friend. And 401(k)s, thankfully, have embraced automation. Many companies now auto-enroll new employees in their 401(k) plan, then automatically increase the employees’ contribution on a regular basis, typically once per year.
If your company offers that kind of auto-escalation, take advantage, says Olivia S. Mitchell, executive director of the Pension Research Council at the Wharton School of the University of Pennsylvania. “You’ll start out at a relatively low contribution rate — maybe 3% — but you’re pre-committing to having your contribution rate go up by a percent a year.”
The caveat: Don’t get complacent and assume that auto-increase will magically land you where you want to be by retirement. You still need to do the work to make sure you’re on track to save enough. A retirement calculator can help you here.
MORE >> 401(k) calculator
Consider the Roth option
Many plans now offer both a traditional and a Roth 401(k) option. Similar to a Roth IRA, the latter allows you to put away after-tax dollars, so money can be distributed in retirement tax-free. It can be an excellent choice, especially if you think your taxes are lower now than they will be in retirement; you’re essentially pre-paying and locking in that lower rate.
The downside is that because the money won’t come out of your paycheck before taxes, it costs more in the short run to choose the Roth. Consider it a favor to your future self.
Ask your plan sponsor to do better
Many employees wouldn’t consider tapping on the door of human resources to gripe about their 401(k) plan, but if your plan has high fees or a pricey investment selection, that’s exactly what you should do.
“In the last several years, many fund management companies have started offering less expensive share classes, called R share classes, that are intended for retirement accounts,” Mitchell says. “The employer or plan sponsor might not be alert to the fact that these new share classes are available, so it behooves employees to poke them every now and then.”
To find your plan’s expenses, look at your summary plan description or your plan statements. The Department of Labor requires annual disclosure of fees.
MORE >> Analyze your 401(k) fees
Don’t set it and forget it
Whether or not your plan sponsor is willing to make a change to improve your plan’s expenses, it’s important to take some ownership by checking in with your investment options regularly, Mitchell says.
There’s no need to tinker with your investments constantly. Doing so can actually hurt your performance. Mitchell suggests rechecking your plan at least annually to see if inexpensive but equivalent investment options have been added or if your funds are performing as they should be.
During a long-running bull market like the one we’re in now, there’s also a decent chance for your investments to move out of line, meaning you may find you’re too heavily invested in equities like stock mutual funds for your risk tolerance or time horizon. Many 401(k)s offer a tool that will rebalance your funds for you.
MORE >> NerdWallet’s guide to a 401(k) rollover
Take advantage of financial advice offerings
More and more employers are offering financial wellness programs, including debt management programs, budgeting advice and education about the basics of the financial markets.
If your employer has a financial wellness program, there isn’t much downside to taking part. Many companies bring in consultants or outside firms to offer this kind of education, and learning how to budget or quickly pay down debt could leave you with more money to save for retirement.
This post was updated Feb. 27, 2017.
This article was written by NerdWallet and was originally published by USA Today.