maximize your 401k Scarborough Capital Management

When Your Money Makes Money: 10 Ways to Help Maximize Your 401(k)

Having a 401(k) is a great first step in retirement planning, but how you maximize the opportunities your 401(k) offers can make all the difference. It’s possible to grow a seven-figure 401(k) faster with a few simple steps.

1. Take Advantage of an Employer’s Match

At Scarborough Capital Management, we specialize in 401(k) management, and we tell clients every day: If you’re eligible for an “employer match” program, take advantage of it! When your employer matches your contribution, it’s basically free money! Every year! 

Different companies offer different match programs (usually 3 to 6 percent), so read the fine print, and if it’s possible, contribute the amount that your employer will match each year.

2. Make the Maximum Contribution 

If you are able to save more, talk with a financial advisor about making the maximum contribution. Often times, an advisor can help you find ways to save on everyday expenses so you can increase your contribution. 

Can you save money by exploring new options for your car and house insurance? How about using a list for grocery shopping so you save both time and money by avoiding last minute impulse purchases? Spend some time reviewing your budget and see if there is anything you can forgo spending on. Remember, saving money now means having more money available for your future.


Not sure what you should be contributing to your 401(k)? Contact Scarborough Capital Management for a free, no-strings-attached initial conversation and see if we can help. 


3. Start Early

Because of the power of compound interest, the sooner you can increase your contributions, the more this can help you. 

The secret to creating wealth is actually quite simple: You need to spend less than you earn, then save and invest consistently so you can take advantage of the power of compounding – when your money makes money. 

Prioritize making the maximum contribution to your retirement account early on. Then leave it there and continue to put additional money into other investments so you can get compounding to work for you.

4. Use Any Catch-Up Contributions That You Are Entitled To 

If you’re 50 or older, the tax law provides you with another benefit: Catch-up contributions. These allow you to put additional dollars into your retirement accounts and health savings accounts. They are designed to help late starters save more, but when you want to build your wealth, they can help you get there faster.

Since these are also tax-favored, you can either get the upfront tax deduction (with a traditional retirement account) or contribute more that will be taxable up front but tax-free later (with Roth accounts).

5. Consider a Health Savings Account

Any time you invest with tax benefits, you make your money work harder for you. A Health Savings Account (HSA) is yet another tax-advantaged way to save money. However, it also provides you with a rare triple tax benefit. 

First, you can take an immediate deduction for the money you put in your HSA each year. 

Second, if you invest the money in your Health Savings Account, those funds will also accumulate on a tax-deferred basis. No matter how well your HSA investments do, you will not be taxed on those earnings while they remain in the account. 

The third tax benefit involves how you withdraw money from your HSA account. As long as you use the money for approved health care expenditures, you will not owe any taxes on those funds, giving you a rare triple tax savings benefit. And these health care expenditures don’t necessarily have to be for you; they can be for your spouse or any dependents.

With HSAs, your money stays in your account, even if you don’t spend it all. You never lose any of it. If you’re healthy and don’t go to the doctor often, they can be especially beneficial, since you can keep that unspent money invested for your future. And when you’re saving money on insurance, it’s just more than you can use elsewhere, like a 401(k).

6. Increase Your Contributions When You Get a Raise

When you get a raise at work, if you’re like most people, you reward yourself. A new car, a new kitchen, better vacations. However, a better idea may be earmarking, if not all, at least a majority of the raise to fund your savings. If the money is put toward your retirement accounts, you could take advantage of tax benefits too.

This habit alone can make a substantial difference in your financial future. 

If you’ve been living comfortably on your current income, you may not even notice the raise if you put it away. Remember, this can mean a more comfortable lifestyle in the future.

7. Use Your Tax Refund to Your Advantage

Like a raise, a tax refund can be used the same way – instead of splurging on something that will give you immediate, but more than likely short, gratification, put that refund in your 401(k) and make the money work for you. 

Another thing to consider is if you do receive a tax refund every year, talk with a financial advisor about changing your withholdings, so less is taken out every paycheck and you can contribute that money earlier.

8. Avoid Big Mistakes

Even “small” decisions about your 401(k) can actually be big mistakes. 

Taking a loan against your 401(k), for example, can have bigger drawbacks that benefits, because you may have to pay taxes twice on the money and it can diminish any benefits you get from compound interest. 

Talk with a financial advisor before making any decisions about your 401(k) to make sure it’s the best move for your situation and long-term goals. Remember, you want to maximize the opportunities available through your 401(k), not minimize the benefits of having one.

9. Review Your Plan

Regardless of whether you’re working with a financial advisor or handling your finances on your own, you want to make sure you review your financial plan on a regular basis. 


There are many life events that can change your financial needs, and therefore, the amount of money you can contribute. For example, if you just started a family, you may want to contribute a bit less, preventing the need to take out a loan. If you received a large inheritance, on the other hand, you may be able to save more. 

Re-evaluating your financial plan on a regular basis, at least once a year, can be wise.

10. Don’t Do It All Yourself 

Unfortunately, we humans are biologically wired to be lousy investors. We may have the best intentions, but react later instead of responding to a situation in an educated, calm way. When it comes to our money and life savings, it’s harder to pause and take a deep breath than it may sound. 

Most of us are emotional when it comes to money. Working with a professional can give you an outside, unbiased opinion. 

If you do decide to take it on yourself, make sure you commit the necessary time for self-education – it is your future quality of life on the line, after all, so you want to make sure you’re making the right moves.

If you want outside advice, contact us to schedule a complementary, no-strings-attached initial conversation to see how we can help. 

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Securities through Independent Financial Group, LLC (IFG), a registered broker-dealer. Member FINRA/SIPC. Advisory services offered through Scarborough Capital Management, a registered investment advisor. IFG and Scarborough Capital Management are unaffiliated entities.