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8 Last-Minute Strategies to Maximize Your 401(k) Contributions in 2014

The end of the year is always a good time to go over your finances and make sure you’re on track to meet your financial goals. It’s time to make plans for the upcoming year–but also to make sure you’ve done everything you can this year to get on a sound financial footing for the future.

One thing you probably haven’t done is max out your 401(k). Most people don’t. According to Vanguard’s annual How America Saves report, only 12% of retirement plan participants maxed out their contributions in 2013, and only 14% of savers over 50 who had the opportunity to make additional “catch-up” contributions took advantage of it.

It won’t come as a surprise that older and more affluent investors are more likely to maximize their 401(k) savings. In a recent data analysis of data from investors who track their portfolios with SigFig, we found that 60% of 40 to 49-year-old investors are on track to contribute at least $17,500 to their 401(k) plans in 2014 (the maximum contribution limit this year, though the amounts in the analysis include employer matching contributions, where applicable), compared to 24% of investors in their 20s. At the same time, only 8% of investors with household income of $50,000 or lower were maxing out contributions, compared to more than 67% of investors earning $200,000 or more.

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But maxing out your 401(k) isn’t the only way to maximize it and the end of the year is just the right time to do that. If you’ve set up automatic deferrals and then forgotten all about your 401(k), now is the time to see how much you’re really saving, how close you are to your goals, and whether you need to make any changes to maximize your savings and minimize your costs.

Here are eight ways to get there:

1. Getting a bonus or a raise? Pay yourself first.

If you get a bonus this year, consider contributing some or most of it to your 401(k). Same if you’re getting a raise: pay yourself before you’re tempted to spend it.

Some plans will automatically treat your bonus the same as your base pay, deferring the same percentage as is usually taken from your salary. Others won’t. Ask your HR department or plan administrator how yours will be treated. Just don’t accidentally go over the maximum 401(k) contribution limit for the year — you’ll end up being taxed on that money twice.

2. Put your last paycheck (or two) straight into the plan.

Giving cash for the holidays may make Emily Post cringe, but being on the receiving end of a cash gift isn’t so bad. If you have some cash to spare, why not put your last check or two for the year into your 401(k) plan? Call your HR department or 401(k) plan manager and have them temporarily bump up your contribution percentage. You can go as high as 100% of your pay, as long as you stay under the maximum for the year. You can scale that amount back down later.

3. Learn from last year’s tax return.

Why worry about taxes now when you have until April next year to file for 2014? If you got a tax refund this April, that means your withholding is too high. You can change it so you’re paying less in taxes with each paycheck going forward and — this is key — start putting that money in your 401(k) now. The result: instead of giving an interest-free loan to the IRS, you’ll be putting that money to work for you right away.

4. Are you eligible for the Saver’s Credit?

If you earned less than $30,000 in 2014 as an individual (or $61,000 as a married couple filing jointly, or $45,000 as a head of household), you’ll be able to claim a tax credit on up to $2,000 ($4,000 for married couples filing jointly) contributed to a 401(k) or IRA. Your income may not allow you to max out your 401(k) contributions, but you will get a little bit of help in the form of the Saver’s Credit. Make sure you claim it.

5. Review your 401(k) contribution level.

If you were automatically enrolled in your plan, check how much you’re actually saving. Most plans with automatic enrollment set deferral rates at 3%, and that’s low. Increase that rate if you can.

Think you’re still too young to be concerned about retirement savings and have other bills to worry about? It’s hard to save when you’re young and you’re not earning much yet. But every dollar you put away today will likely be worth much more than a dollar you put away ten or twenty years from now, because it has more time to grow.

6. Review your 401(k) fund choices and expenses.

Do you know how much you’re paying in fees on your 401(k) investments? Analyzing fees in investors’ 401(k) accounts, we found that the average user was paying more than they needed to. In other words, while most plans have low-cost options available, many investors aren’t taking advantage of them.

7. Maximize your 401(k) company match.

It’s the 401(k) advice you see everywhere: If your employer offers a matching contribution, make sure you’re saving enough to get all of it. It’s free money. Go get it. And if your employer doesn’t offer a match, it’s time to ask for one. According to a recent survey by Aon Hewitt, 98% of employers who offer a 401(k)-type plan offer an employer match. If your employer doesn’t do this, they’re behind the times, and that’s a competitive disadvantage.

8. Maxed out your 401(k)?

Congratulate yourself for a job well done this year! But don’t stop there. It’s time to talk to an accountant or simply research your IRA or Roth IRA contribution eligibility. Consider it a gift to your future self.

Sarah Morgan is a freelance writer and editor based in Brooklyn. Her work has appeared on SmartMoney.com and in the Wall Street Journal.

These Retail Employees are Buying Up Company Stock in their 401(k) Accounts — Should You?

Let’s say you work at a fast-growing company whose stock has been blowing up over the past five years. It’s an exciting place to work, the job is satisfying, and management seems to have your back. Perhaps you have the the company’s current stock price as a widget on your desktop or phone lock screen.

Better yet, the company offers you free shares, or stock options, or the ability to buy its stock at a discount in your 401(k). What could go wrong?

Plenty. Everything. In a word: Enron. When Enron went bust in a massive accounting fraud in 2001, its employees lost their jobs, but many lost a lot more: the entire balance of their 401(k), which many employees had invested in 100% Enron stock.

Similar sad stories piled up during the 2008–09 bust. Are investors getting the idea? You’re already exposed to your company’s risks — you work there — and don’t need to pile on any more risk by investing in employer stock.

Employee owned

We analyzed data from investors who use the SigFig portfolio tracker, looking for employer stock inside users’ 401(k)s. Two companies stood out: Amazon (AMZN), and Costco (COST).

Before we look at the specifics, a few caveats. First of all, we looked only at stock inside the 401(k). Some companies (Google, for example) don’t offer company stock in their 401(k).

Second, even though we’re highly critical of loading up on employer stock, there may be a good reason to hold even a fairly large proportion of it. If the stock is offered free or at a discount (such as through an Employer Stock Purchase Plan, Restricted Stock Units, or an employer match), it may makes sense to buy some, then sell it off when you’re allowed to.

Finally, many investors hold investments outside their current employer’s 401(k). An investor who has $10,000 worth of WidgetCo stock in their 401(k) but a $400,000 diversified portfolio in a rollover IRA isn’t doing anything terribly wrong, but we’re only looking at 401(k) balances.

Now, the stuff you want to hear.

amazon 401_006

At Amazon, 71% of employees in the analysis hold between 10% and 20% of their 401(k) in Amazon stock. Another 10% of those employees hold between 20% and 30%, and 9% own more than 30%, including a small subset (0.5%) who have half of their 401(k)s or more in company stock. (See the breakdown here.)

Buying in bulk

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The champion employer stock shoppers, however, are Costco employees.

According to Brightscope, a company that analyzes 401(k) plans, 33% of all the assets in the Costco 401(k) are invested in Costco stock. In SigFig’s data, about 20% of employees have more than 50% of their money in company stock. (See a more detailed breakdown here.)

We suspect this is for two reasons. First, Costco stock has done very well over the past five years. If you bought a little Costco stock a few years ago, it might have grown into a lot. (A good reason to rebalance regularly.) The same is true of Amazon stock, however, and Amazon employees own less company stock.

Second, Costco makes it easy to buy commission-free stock through its Employee Stock Purchase Plan. Chances are, other employers do, too. And it is up to employees to exercise caution, no pun intended, when bulking up on their own company’s stock.

Look, we love Costco: the discount retailer that helps us save our hard-earned cash when we buy our groceries, toiletries and even alcohol in bulk. But when it comes to investing, stuff happens — and diversification covers your assets when it does.

Matthew Amster-Burton is a freelance writer and financial planner in Seattle.

The United States of Apple? A Look at the Most Popular Stocks in Each State

Politically, Americans seem to be more divided than ever. But when it comes to investing, all the states of America seem pretty solidly united — behind Apple (AAPL) and a few other popular stocks.

Apple is one of the most popular individual stocks among investors of all ages*. That’s hardly a surprise: Apple is the largest company in the world by market capitalization. It’s also the most commonly held stock in every state in the union.

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Other top picks that are popular all around the country include Facebook (FB), General Electric (GE), AT&T (T), Ford (F), Google (GOOG), Microsoft (MSFT), and Intel (INTC), according to data from investors who sync their portfolios with SigFig.

There are a few regional quirks, however. In most states, the top five most popular stocks are a mix of newer, more high-tech companies like Facebook (FB) and older, more established firms like General Electric (GE). But in both California and DC, the top five most commonly held stocks all skew new: Facebook (FB), Tesla Motors (TSLA), Alibaba Group (BABA), Google (GOOG), and Amazon (AMZN).

Investors in some states also display hometown pride in their stock-picking. Some broadly popular stocks are better-loved at home than they are elsewhere. Microsoft (MSFT) and Starbucks (SBUX) are popular all around the country, but they’re by far the most popular in Washington, where both companies were founded. In that state, for example, investors are 1.6 times more likely to hold Starbucks stock than investors in any other state. Ford (F) is also a common pick, but it’s the number one most commonly held stock (after Apple) in only one state: Michigan.

The biggest hometown hero, however, is none other than Warren Buffett: 10% of stock investors in Nebraska own stock in his company, Berkshire Hathaway (BRK.B). That’s 8.5 times more than the rest of the country.

Hometown pride is all very well, but many investors are putting too much of their money into single stocks. More than half of investors have more than 10% of their portfolios in a single stock, according to SigFig data, and many of the most popular stocks among investors around the country are also on the list of the stocks most commonly exposing investors to single-stock risk. Don’t let your loyalty to locally grown businesses take you too far: remember that a balanced, diversified portfolio is the best way to protect yourself from the market’s ups and downs.

*All data in this analysis is aggregated and anonymized from 750,000 investors who track their portfolios with SigFig. SigFig calculates “popularity” in terms of what % of stock owners in each state own a particular stock.

Sarah Morgan is a freelance writer and editor based in Brooklyn. Her work has appeared on SmartMoney.com and in the Wall Street Journal.

The Editors

Aleks Todorova

Aleks Todorova

Editorial Director

Aleks runs content at SigFig. Before joining the company, she ran the editorial teams at Visually and Mint.com. Her work has appeared on SmartMoney.com and the Wall Street Journal, among others. At lunchtime and on weekends, you’ll find her swimming, biking or running — or all three, in that order.

Benny Wijatno

Benny Wijatno

Data Science and Analytics

Benny does all things data and science at SigFig. He was Director or Product Analytics at TinyCo and a Principal at Applied Predictive Technologies, where he and helped companies run smarter experiments. He studied Economics at Harvard, is an avid cook, and loves running.