How To Make Your Retirement Money Last With These 5 Easy Steps

The best things in life may be free, but your workplace retirement plan almost certainly is not.

Most investors work hard and save doubly hard to build their tax-sheltered, employer-sponsored 401(k) retirement account.

Luckily, making sure you get the most out of your retirement nest egg is the easy part. These are five simple things you can do to ensure nothing trips up your plans for a secure future:

  • Contribute enough. The first thing investors who have a 401(k) plan at work should do is participate, say investing experts. Then, try to consistently increase your contributions to the extent possible. Over time, set yourself the goal of contributing the maximum allowed under the law.

"It goes back to an old adage: Pay yourself first," said Art Miller, president of Capital Preservation Strategies in Illinois. "M ake contributions even if has to hurt a little bit financially." Many people, he added, don't contribute nearly enough.

If you were auto-enrolled in your 401(k), the default contribution rate may be set at 3% or thereabouts of your pretax income. Bumping that up to 10% or even 15% is advisable. Be realistic about what your income needs in retirement are likely to be. Longevity is a risk. Americans today are more likely than ever before to outlive their money.

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The IRS contribution limits for 401(k) plans -- as well as related 403(b) and most 457 plans -- is $18,000 in 2016, or $24,000 if you are over age 50.

Make sure you're contributing enough to at least get the maximum employer match. A match is not offered by all employers, but many do. These companies and other organizations match part or all of their employees' retirement account contributions as part of their benefits package.

If you don't contribute anything at all, you're throwing away free money. Those additional dollars from your employer have the power to magically increase the value of your 401(k) over time, thanks to the compounding effect.

  • Get to know your 401(k). Use investing tools, such as online financial calculators, to invest appropriately. They may be offered by your plan or your financial advisor .

In fact, many plan sponsors nowadays work with a financial professional to deliver the plan to their employees, says Geno Cufone, a senior vice president at Ascensus, one of the largest independent retirement service providers in the U.S.

"Take advantage of any advice they are giving you," Cufone said. "Check on your retirement readiness: How much money do you need to be ready?"

Cufone suggests that investors take into account all their retirement saving vehicles, including 401(k)s, as well as IRAs , rather than just one at any given time. People tend to save money with different companies and service providers over the course of their careers, and it can be challenging to keep track of different accounts, he said.

Some retirement service providers offer integrated online tools to help employees consolidate all their retirement money in one place. So do web-based platforms such as Ascensus' Retirement Readiness calculator even takes into account estimated Social Security benefits.

"It gives you a complete picture of where you are," added Cufone, whose company helps more than 6 million Americans save for the future.

  • Review periodically. Miller, the financial planner, is surprised by how little some of his clients seem to know about what's really inside their retirement portfolios. They start off by describing themselves as conservative investors, but it eventually turns out that 70% to 90% of their portfolio is in riskier types of investments.

"Typically, people don't watch what is happening to their accounts," said Miller. His practice has catered to professionals, small-business owners, investors nearing retirement and retirees for approximately 26 years.

Make sure your investment portfolio is diversified and the funds within it are right for you. Many workers get defaulted to target date funds. For most investors, these funds are a solid option for successful retirement investing over the long term. They make investing decisions based on your targeted retirement year. They start off more aggressive and become more conservative as retirement nears.

But their drawback is a one-size-fits-all approach. Not every 30 year old has the same investing needs or risk tolerance. Perhaps you would like to take on more or less risk than the target date fund offers.

To make changes, speak to the financial professional assigned for your plan or a financial advisor if you have one. Unless you prefer the DIY route, of course.

  • Rebalance portfolios. Every quarter, or at least once a year, consider rebalancing your portfolio.

Over time, different asset classes produce different returns, so the portfolio's asset allocation changes. If it has strayed from the original targets, a portfolio rebalancing may be in order.

This is a tune-up for your retirement portfolio, intended to bring an investment strategy back in line to its target or to modify the target. Basically, it keeps risk in check.

However, this question stymies many investors: How often, how far, and how much to rebalance?

"Most broadly diversified equity and bond portfolios should be reviewed periodically -- once or twice a year -- and rebalanced only if the targeted percentage of equities or bonds has deviated by a meaningful amount, for example, by more than 5 percentage points," said a spokesman for Vanguard, the biggest U.S. mutual fund family.

In the case of target date funds, rebalancing isn't necessary.

The funds' "glide path" is designed to help a typical investor reach his or her retirement savings goal while bearing an appropriate level of risk, according to Vanguard, which manages nearly $358 billion in target date assets in the U.S., more than any other firm.

  • Weigh your options. Your retirement portfolio isn't a set-and-forget household appliance. It's not just your nest egg that is changing. So are the features and parameters of your 401(k) plan.

If your 401(k) plan introduces extra features, such as automated contribution increases, automatic portfolio rebalancing and model portfolios, take advantage of it. If you can increase your contribution, do it. If any funds are newly offered, consider adding or switching to it.

Also, many employers are starting to offer a Roth 401(k) and in-plan traditional-to-Roth conversions. Like Roth individual retirement accounts (IRAs), this increasingly popular vehicle allows you to make after-tax contributions and to take tax-free withdrawals at retirement. That makes a Roth 401(k) an especially ideal option for young investors with long investment horizons.

It may be a smart strategy to contribute to both a traditional 401(k) and a Roth 401(k). Funding both types of accounts can give you more withdrawal options in retirement, tax-wise.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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