How to Maximize Your 401k


About the Author Advisor

carrie sax

Carrie Sax, CFA, CFP®

Vice President
Berkeley, California


The information presented here is not intended to be regarded as a comprehensive list of considerations, including but not limited to, categories, services, or qualifications that a client or prospective client should consider when assessing or comparing Financial Advisors and/or Firms. As the author of this piece, EP Wealth Advisors, LLC (“EPWA”) has tailored the messaging of this article to align with the categories, services, qualifications, capabilities and services that it offers.. EPWA makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. EPWA reserves the right to make changes to some or all of the information displayed here without notice. 

The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. The referenced material identified herein is limited in nature and specific to what is offered by EPWA. There is no guarantee or warranty that the services offered by EPWA will satisfy your financial services requirements. Services offered by other advisors may be more suitable to your specific needs. 

All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. The risk of loss can never be eliminated even if working with a professional.

The amount of money in your portfolio when you leave the workforce can mean the difference between a comfortable or a financially-strained retirement. That’s why maximizing your 401(k) during your career is so important.

With a portfolio analysis, by putting your needs first, we devise individualized, goal-oriented portfolios. These goals are based on factors such as your age, risk tolerance, and the amount you need to retire comfortably.

New Contribution Limits

As of 2023, the amount of contributions individuals can make to their 401(k) plans rises to $22,500. That’s up from $20,500 in 2022. It’s always wise to contribute the maximum amount for which you are eligible, even if it’s a bit of a budget stretch. It should pay off in the long run.

Those employees aged 50 and up may contribute an additional $7,500 in catch-up contributions. That’s up from $6,500 in 2022.

Employer Match

If your employer matches your 401(k) up to a certain amount, that’s free money. A typical match is 50 cents per dollar saved, up to 6 percent of your pay. Employer matching is one of the best ways to maximize your 401(k).

However, there is a caveat. Until you are fully vested, you don’t receive the employer match. Vesting usually means you must stay with the company for at least five or six years. If you’re thinking about changing companies, whether you are currently vested is an important consideration. Otherwise, you could lose all or most of your employer matches. It may prove worthwhile to stay at your current company for another year or two to ensure you receive the full match.

Even if you really like your company and think it will do well in the future, limit your portfolio to no more than 10 percent of its stock. This can help you avoid unnecessary risk from a concentrated stock position .

Pretax 401(k) vs. Roth 401(k)

The right tax planning is also a critical part of preparing for retirement. You must choose between a traditional, pretax 401(k) or a Roth 401(k). While most employers offer the former, not all offer the latter.

With the Roth, taxes are paid upfront. Once the money goes in, it is never taxed again. If that bucket of money grows fourfold or fivefold, you pay zero taxes on any gains inside the Roth 401(k).

As for the pretax 401(k), it can also grow nicely, and it lowers your adjusted gross income while you’re working. However, the money comes out via your Required Minimum Distributions (RMDs), which you must start taking the year you turn 72. Your income tax rate, which is likely in a lower bracket than during your working years, applies to any money you take out. Because you never paid taxes on your original contributions, you have a zero-cost basis, and therefore will pay taxes of the full distribution

Regardless of which type of employer retirement plan you choose, the IRS will be sure to collect their share of taxes. However, working with your financial advisor to determine which plan best suits your needs can help minimize your tax burden and maximize your retirement savings.

Talk to EP Wealth Advisors About How to Maximize Your 401(k)

Knowing your 401(k)’s effects on retirement is an essential part of financial planning for your golden years. An effective retirement planning guide can provide key strategies for steadily growing and maximizing your savings vehicle, no matter what stage of your career you’re in.

Contact EP Wealth Advisors and see how we can help devise an effective financial plan to meet all of your retirement goals.



Our breadth of coverage across the U.S. means we’re local—here to serve your needs at your convenience.