A common hurdle in retirement savings is the hesitation to engage with one’s 401(k) account due to feelings of confusion or anxiety when viewing balances and statements, which often results in months or even weeks of inaction. However, significant positive adjustments to a 401(k) plan can be achieved by dedicating just a few minutes to targeted, high-impact tasks without needing to become an expert on investment mechanisms or complicated plan regulations.
Here are four practical steps, each designed to take approximately five minutes or less, to help you start 2026 with a stronger 401(k) strategy.
1. Secure the Full Benefit of Your Employer’s Matching Contribution
One of the most beneficial moves to enhance your retirement savings is to ensure you receive the maximum employer match offered in your 401(k) plan. This approach effectively doubles your personal contributions up to a specified limit, adding significant value without substantially straining your budget.
Each employer tailors their matching formula differently, often contributing a certain percentage relative to your own contributions, up to a defined threshold of your salary. For instance, if your annual salary is $60,000 and your company matches 100% of your contributions up to 4% of your salary, that translates to $2,400 saved by you and an additional $2,400 contributed by your employer, culminating in $4,800 added to your retirement savings annually.
To determine the amount you need to save from each paycheck to capture this full match, divide your required annual contribution by the number of pay periods. If you receive paychecks biweekly, which typically means 26 payments per year, dividing $2,400 by 26 results in approximately $92 per paycheck.
While aiming for the full match is ideal, contributing at least a portion of it still benefits your long-term savings due to the compounded growth over time.
2. Opt for Percentage-Based Contributions to Align with Income Changes
Configuring your 401(k) contributions as a percentage of each paycheck instead of a fixed dollar figure provides flexibility and growth aligned with salary increases. This method automatically adjusts your saved amount upward as your pay raises, eliminating the need for manual updates and helping you consistently increase retirement savings over the years.
Those who currently contribute a static dollar amount risk missing out on incremental savings if they forget to increase contributions following a pay raise.
If your plan allows online management, you may be able to modify your deferral type yourself. Otherwise, your human resources department can guide you through the steps to switch to percentage-based contributions.
To calculate your current contribution percentage, divide the amount you contribute each paycheck by the size of your paycheck. For example, contributing $100 from a $2,000 paycheck equates to saving 5% of your income.
3. Incrementally Boost Savings by Increasing Contributions by 1%
For those prepared to increase their savings but constrained by budget considerations, raising your 401(k) contributions by 1% of your income is a manageable approach. If you earn $60,000 per year, a 1% increase equals an additional $600 annually or about $50 monthly.
Implementing small savings increments alleviates immediate financial pressure compared to large contributions, yet these modest increases compound significantly over time. For example, contributing an additional $50 each month could translate to nearly $8,700 more after ten years, assuming an average annual growth rate of 8%.
This adjustment can typically be made via your online 401(k) account or through communication with your HR department. If you find this change beneficial, consider repeating the process in subsequent years to continually build momentum.
4. Review and Update Your Beneficiary Designations for Peace of Mind
Periodically verifying the designated beneficiaries on your 401(k) plan is crucial to ensure that your assets are distributed according to your current wishes. Changes in family circumstances such as marriages, divorces, births, or deaths could necessitate updates to this information.
For example, it is important to prevent unintended inheritance scenarios, such as an ex-spouse receiving benefits following a divorce, or ensuring minor children or new family members are correctly listed.
Many plans require the designation of both primary and contingent beneficiaries, with contingent beneficiaries receiving assets only if the primary beneficiary is deceased or declines the inheritance.
Taking a moment to confirm these details while updating your contribution rates enhances your retirement preparation and provides clarity and security to your loved ones.
Conclusion
Even engaging in just one of these four actions can significantly improve your retirement readiness. These straightforward steps underscore that managing your 401(k) need not be intimidating or time-consuming, and they empower you to take control of your financial future incrementally and confidently.