401(k) Year-End Playbook: Checklist for the Savvy Investors
By: Jeff J. Kim
As we head into the end of 2024, it’s the perfect time for 401(k) participants to double down and get proactive about their retirement accounts. At Gerber Kawasaki, we believe that maximizing your retirement savings is one of the most important steps you can take toward financial independence and security. With market volatility, inflationary pressures, and a shifting economic landscape, it’s crucial to stay focused on your long-term goals while making strategic adjustments.
Here are the top things every 401(k) participant should do before the year wraps up to make sure they’re fully taking advantage of the benefits and optimizing their portfolios.
1. Max Out Contributions If Possible
One of the easiest ways to increase your retirement savings is by maxing out your 401(k) contributions. The IRS usually adjusts these limits each year and GK is here to keep you updated. In 2024, those under 50 should check if they’re on track to contribute the max amount of $23,000, while those 50 and older can make additional catch-up contributions of $7,500 (totaling $30,500).
Why It Matters: Maxing out your 401(k) plan is powerful for two reasons: you reduce your taxable income for the year, and you get a larger portion of your savings invested and compounding tax-deferred. Even if you can’t hit the maximum, boosting your contribution rate —if only by a few percentage points— can make a signifcant difference over time.
2. Evaluate Roth vs. Traditional 401(k) Contributions
If your plan offers a Roth 401(k) option, it’s worth considering. With a Roth 401(k), you’re paying taxes on the contributions now, but withdrawals in retirement are tax-free. This can be a huge advantage if you expect to be in a higher tax bracket down the road, and it gives you flexibility on how you’ll pull income in retirement.
Why It Matters: A Roth 401(k) is like a hedge against future tax hikes. Plus, tax diversification is a smart strategy. You’ll have more control over your taxable income in retirement by balancing tax-free Roth income with any taxable sources, like a traditional 401(k) or IRA.
3. Take Full Advantage of Employer Matching
Leaving any employer matching funds on the table is a costly mistake. Even if you’re strapped for cash, prioritize contributing at least enough to get the full employer match. Think of it as a 100% return on your money.
Why It Matters: An employer match is essentially free money, and it can add up significantly over the years. Plus, the compounding effect is huge. Make sure you’re meeting or exceeding the contribution level required to get the full match by year-end.
4. Review Your Portfolio Allocation
Markets don’t stay the same, and neither should your asset allocation. If you haven’t rebalanced recently, your portfolio could be overexposed to one asset class or sector. With recent volatility in tech, energy, and international markets, it’s smart to review and adjust your allocations if needed.
Why It Matters: Your 401(k) is a long-term investment, so make sure it’s aligned with your risk tolerance and goals. Don’t let market swings dictate your approach, but do use them as an opportunity to take profits or reposition your investments for growth or safety, depending on your horizon.
5. Consider the “Catch-Up” Contributions (If You’re 50+)
If you’re 50 or older, the IRS lets you contribute additional catch-up amounts to help you boost retirement savings. In 2024, the catch-up contribution limit is $7,500. Don’t underestimate the impact of these extra contributions in your later working years.
Why It Matters: Catch-up contributions can accelerate your retirement savings during your peak earning years, helping you make up for lost time or simply solidifying your nest egg. For those nearing retirement, this can provide peace of mind and greater flexibility in the future.
6. Check for Required Minimum Distributions (If You’re 73+)
For those who are 73 or older, the IRS requires you to take Required Minimum Distributions (RMDs) from traditional retirement accounts. If you don’t, you face a hefty penalty—up to 25% of the amount not withdrawn.
Why It Matters: RMDs are mandatory, but they’re also a tax-planning tool. Make sure to consult with a tax advisor to plan your RMDs in a way that won’t push you into a higher tax bracket.
7. Watch Out for Fees
Fees are often overlooked, but they compound over time and can take a big chunk out of your returns. Many 401(k) plans offer low-cost index funds, which often provide similar market exposure at a fraction of the cost of actively managed funds.
Why It Matters: High fees can eat away at your savings, especially if you’re paying them for underperforming investments. Reviewing your fund options and switching to lower-cost funds if possible is a no-brainer.
8. Re-Evaluate Your Financial Plan
Take a step back and review your entire financial plan. Are you on track to retire at your target age? Is your 401(k) aligned with your other retirement accounts and investments? Have there been changes in your income or expenses that need to be accounted for?
Why It Matters: Retirement is not a one-size-fits-all situation, and life changes happen. Taking time each year to review your progress ensures that you’re on track and can adjust as needed.
9. Update Your Beneficiaries
Make sure your beneficiary designations are up to date. Major life events such as marriage, divorce, and the birth of a child are all reasons to review and update these designations.
Why It Matters: Keeping beneficiary information updated is critical to ensuring that your assets go to the intended individuals. This is especially important for retirement accounts, as beneficiary designations override wills in most cases.
10. Set Goals for 2025
As you wrap up 2024, it’s a good time to set new savings and contribution goals for 2025. If you’re not already increasing your contributions each year, consider setting up automatic contribution increases to keep your retirement on track.
Why It Matters: Small, incremental increases add up over time. By setting automatic increases, you can painlessly grow your retirement savings, even if it’s just by 1% each year. This can help you meet your retirement goals without having to make major lifestyle changes.
Year-end is the ideal time to make sure you’re maximizing your 401(k) and setting yourself up for long-term financial security. By staying proactive and making adjustments where needed, you’re not only building your retirement fund— you’re building a future on your terms. At Gerber Kawasaki, we always emphasize the importance of staying disciplined, seizing opportunities, and making sure your financial plan aligns with your lifestyle and goals.
Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: http://www.adviserinfo.sec.gov .
Jeff J. Kim is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$3.16B billion in assets under management as of 9/30/24. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results." Certain information contained herein constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “potentially”, “continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events, results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Nothing contained herein may be relied upon as a guarantee, promise, assurance or a representation as to the future.