This Could Be the Most Important 401(k) Move You'll Make All Year

If you were to max out your 401(k) year after year and invest your savings wisely, there's a good chance you'd be in for a very comfortable retirement. But maxing out a 401(k) is far from easy.

To max out today, you need to contribute $24,500 a year if you're under age 50, or $32,500 if you're 50 or older. Not only might maxing out a 401(k) be off the table, but given how expensive life is today, you may not even be able to contribute a much smaller amount.

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But even if that's the case, perhaps the single most important 401(k) move you can make this year is contributing enough to claim your workplace match in full. If your company offers matching contributions, failing to contribute enough to earn the entire match is like leaving part of your paycheck behind.

Why giving up a match is not ideal

Many employers match a portion of what employees contribute to their 401(k) accounts. If your company matches 3% of contributions and you earn $80,000 per year, contributing $2,400 out of your own paychecks gives you access to another $2,400 you can then save and invest.

The latter point is important. When you give up a 401(k) match, you lose the opportunity to grow that money into a larger sum.

Say you're 25 years old and retirement is 40 years away. If your 401(k) generates an 8% yearly return, which is a bit below the stock market's average, and you give up $2,400, you could end up with about $52,000 less in retirement savings after accounting for missing gains.

Ways to find the money

Over a long career, consistently capturing your full employer 401(k) match could add tens or even hundreds of thousands of dollars to your retirement savings. So even if you're balancing other financial priorities, such as paying off debt or building an emergency fund, contributing enough to receive your full employer match is often worth it.

If you're struggling to find the money, here are some quick tips:

• Cut discretionary spending in your budget by 10%. You may find that you have a lot more money to contribute if you're spending less on restaurants, entertainment, and subscriptions.
• Moonlight with a side gig. It can be something you do on your own schedule, like driving for a ride-hailing service, or something preset, like working two evening shifts at a local restaurant each week.
• Fight for a raise. If you can get your employer to boost your paycheck, the money may come naturally.

While maxing out a 401(k) is certainly tough, contributing enough to claim your full workplace match is an opportunity you shouldn't pass up -- even if it means making some sacrifices.

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