How to Max Out Your 401(k) in 2017

Fully fund your account.

A 401(k) account allows you to take advantage of tax breaks, employer contributions, investment growth and automatic saving. But you also need to take care to avoid 401(k) fees and penalties. Here's how to help your 401(k) account grow faster in 2017.

Qualify for tax breaks.

You can defer paying income tax on up to $18,000 that you save in a 401(k) plan. A worker in the 25 percent tax bracket who saves this amount could reduce his tax bill by $4,500. Income tax won't be due on this money until it is withdrawn from the account. Workers who earn less than $31,000 in 2017 ($62,000 for couples) might additionally qualify for the saver's credit, which is worth between 10 and 50 percent of 401(k) contributions up to $2,000 for individuals and $4,000 for couples.

Make catch-up contributions.

Employees age 50 and older are eligible to save an additional $6,000 in a 401(k) plan in 2017 for a total 401(k) contribution of $24,000. A 55-year-old employee in the 25 percent tax bracket who maxes out his 401(k) plan could reduce his current tax bill by $6,000.

Get a 401(k) match.

A 401(k) match is one of the fastest possible ways to boost your retirement savings. A 401(k) match of 50 cents for each dollar you save in the 401(k) plan is a 50 percent return on your investment. A dollar-for-dollar 401(k) match is a quick way to double your money. Just watch out for vesting schedules that require a certain number of years on the job before you can keep the 401(k) match.

Consider a Roth 401(k).

Instead of deferring income tax on your retirement savings, some employers provide a Roth 401(k) option that allows you to pay tax on your retirement savings at your current rate. You don't have to pay income tax on the investment gains while the money is in the Roth 401(k), and withdrawals in retirement are often tax-free.

Select low-cost funds.

The expense ratio of the funds you select is deducted from your 401(k) account regardless of how the investment performs. Your 401(k) fee disclosure statement lists how much each fund in your 401(k) plan costs to own. Consider making changes if you can find a lower-cost fund that meets your investment needs.

Avoid penalties.

If you take money out of your 401(k) account too soon or too late, you may be hit with a penalty. There's a 10 percent early withdrawal penalty if you withdraw your savings before age 55. You will also be charged a 50 percent penalty if you fail to take a required minimum distribution -- and pay the resulting income tax bill -- after age 70 1/2.

Sign up for direct deposit.

Your 401(k) contributions can be withheld from your paycheck before you ever get a chance to spend them. This is the fastest way to get money into your account and reduce the temptation to skip a deposit.

Increase your withholding.

As you get raises and bonuses, consider redirecting a part of your pay increase to your 401(k) plan. Some 401(k) plans have an automatic escalation feature that will increase your savings rate over time without any further action.

Don't stick with the default savings rate.

Many employees are automatically enrolled in their workplace 401(k) plan. When this happens, the default savings rate is typically 3 percent of pay. This low savings rate isn't likely to produce a big enough nest egg to retire comfortably and might not allow you to get the entire 401(k) match. Take care to select a savings rate that will provide you with the retirement income you need.

Get some advice.

Financial professionals who provide advice about 401(k) accounts will have a fiduciary responsibility to recommend funds that are in the participants' best interest beginning in April 2017. This should make 2017 a great year to check in with a financial advisor to make sure your investment selections and saving rate have you on track to accumulate a sufficient nest egg for retirement.