Most people know they should contribute to their 401(k). Fewer know if they’re truly maximizing it. Your 401(k) isn’t just another paycheck deduction – it’s one of the most powerful long-term wealth-building tools available. The key is using it strategically, not passively. Here are five smart ways to make the most of your plan.

1. Earn your employer’s match. It’s a good idea to contribute as much as you can afford to your 401(k) plan. (In 2026, you can put in up to $24,500, or $32,500 if you’re 50 or older. If your plan allows, there’s also a “super catch-up” contribution of $11,250 for people aged 60 to 63, for a total contribution limit of $35,750.) At least put in enough to earn a matching contribution if one is offered. Otherwise, you’re shortchanging yourself. For example – your employer matches 50% of your contribution up to $5,000. If you put in $8,000, your employer’s 50% match is $4,000, and you’re leaving $1,000 “on the table.”

2. Give your plan a raise. When your income increases, consider increasing contributions to your 401(k). When you get a bonus or a tax refund, you could use some or all of that to boost your retirement savings.

3. Evaluate the Roth option. When you invest in a traditional 401(k), you contribute pre-tax dollars, lowering your taxable income that year. Your earnings grow tax-deferred and are taxed when you withdraw. If your employer offers a Roth 401(k), you contribute after-tax dollars, so your taxable income doesn’t drop that year. However, withdrawals in retirement, contributions and earnings alike, are generally tax-free. (Employer matching contributions and related earnings remain taxable.) If you expect a higher tax bracket in retirement or want to diversify tax treatment for flexibility in retirement, consider the Roth option. In 2026, the Roth option must be used for catch-up contributions if you earn more than $150,000 and are 50 or older. Consult your tax advisor before deciding.

4. Build an appropriate investment mix. You may have multiple investment options in your 401(k). The driving principle early on is growth so your plan can fund a long retirement. But growth-oriented investments are naturally riskier than fixed-income vehicles. When starting your career, you may prefer a portfolio weighted toward aggressive growth, as you have years to recover from downturns. Nearing retirement, though, consider shifting to a more conservative mix. A financial advisor can help you choose an appropriate mix at different stages, based on your risk tolerance, time horizon, and goals.

5. Keep your plan intact. At times, you may feel a financial pinch that leads you to consider taking out loans or early withdrawals from your 401(k). However, this can cause you to incur taxes and penalties and will likely slow the growth needed to help reach your retirement savings goals. Taking steps to prepare for unexpected expenses, such as building an emergency fund containing three to six months’ worth of living expenses, can help you avoid dipping into your 401(k). You may also be able to find other ways to access cash.