5 401(k) Moves You'll Be Thanking Yourself for in December

You probably don't need anyone to tell you that the 401(k) decisions you're making today will have ripple effects far into the future. You want to make the right choices that will help you maximize your savings' growth while minimizing your risk of loss and your tax liability.

But you may not know how to actually do this. The five things listed below are a good place to start. They may not all apply to you, but if you do even a few of them now, your future self will thank you.

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1. Decide which type of 401(k) is most advantageous for you

While some employers only offer traditional 401(k)s, many workers now find themselves having to choose between traditional and Roth 401(k)s. The rules for both types of accounts are the same, except that you pay taxes on your Roth 401(k) contributions in the year you make them while you get a tax break for traditional 401(k) contributions.

This reverses in retirement. Roth 401(k) withdrawals are usually tax- and penalty-free, and you pay ordinary income tax on traditional 401(k) withdrawals.

Generally speaking, a Roth 401(k) is your best option if you expect to remain in the same tax bracket or jump up to a higher one in retirement. High earners may prefer to use a traditional IRA so they can pay taxes later, when their income will likely be lower.

2. Make sure your investment options are still a good fit for you

Look over your investment options to make sure they still match your needs and goals, and make changes, if necessary. For example, if you've recently changed your planned retirement date, your old investments might be too aggressive or too conservative, forcing you to make changes to match your new risk tolerance.

You may also be able to find more affordable investment options on a second look. Check your prospectus to learn about plan fees. These are often listed as an expense ratio, or a percentage of your assets that you pay annually to the fund manager. Try to keep your expense ratios under 1% whenever possible.

3. Plan how to claim as much of your 401(k) match as possible

Your 401(k) match is free money that can help you reach your retirement savings goals more quickly, so claiming it should be your top priority if you can. If you can't afford to defer enough for the entire match, get as much as possible.

Talk to your employer if you're not sure how your company's matching formula works. Your employer should be able to advise you about how much you need to contribute during the year to claim the full match.

Once you know how much you must set aside, divide this by the number of pay periods left in the year to figure out how much you must defer per check to get the entire match. Feel free to contribute even more if you're able to.

4. Increase your contributions by 1% of your salary if you can

Increasing your contributions by 1% of your salary is one way to grow your savings without putting too much of a strain on your current budget. This amounts to just $50 more per month if you make $60,000 per year.

If this works well for you, consider doing it again in future years to accelerate your nest egg's growth. You could also try increasing your contribution amount whenever you get a raise.

5. Verify that your beneficiaries are accurate

Your beneficiaries are the people who inherit your 401(k) after you've passed away. These may already be up to date if your family situation is the same as it was last year. But if you've recently had a child or gotten a divorce, you may need to make some changes.

You should be able to do this through your online 401(k) account. If you need help, talk to your employer or plan administrator.

If you'd like, you could make the above activities into a little New Year ritual that you perform annually. It doesn't have to take very long, and it'll give you some confidence that you're doing all you can to prepare for retirement.

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