For many people, this is not an easy time to find money for anything extra, be it a vacation, home repair or new car. One thing that should not be neglected, say financial advisers, is contributions to your employer-sponsored 401(k). Especially if you're 50 or older.

Earlier this week, Fidelity Investments (FID) reported that for the first time in three quarters, more 401(k) participants increased the amounts they are contributing to their retirement funds than decreased them. Average second-quarter Fidelity 401(k) account balances rose 13.5%.

If you are already 50 or hit that age this year, you can also take advantage of the “catch-up” contribution. This kicks in at the half-century milestone and you’re entitled to make it for every year going forward.

The 401(k) catch-up contribution was created to help those who came to the game late to start saving more money as they get closer to retirement -- because no one wants to wind up behind the counter and McDonald's (MCD) or Wal-Mart (WMT). That includes women who were out of the workforce raising children, or those who lacked the resources or foresight to save when they were younger.

In 2009, anyone 50 or older can contribute $5,500 more to their employee-sponsored 401(k) plan than the standard limit of $16,500. So an eligible employee can contribute a total of $22,000.

OK. Sounds smart. But is this a good use of household funds when total family income is stagnant, or even down due to one member's job loss or furloughs?

“If your 401(k) is the only thing that is going to be there for you besides Social Security, then you should find every opportunity to put money into that fund,” says Kathy Boyle, CFP®, president, Chapin Hill Advisors in New York.

“Now, when employers are cutting matches, and people’s budgets are crunched, many are taking their contribution off the table,” she says. “If you are in debt, it’s hard to rationalize 401(k) contributions, much less increasing them. But the 401(k) contribution needs to be at the top of your list. “

Many employer contributions have diminished, but things are slowly turning around on that front as well, according to the latest survey of 175 HR executives by consulting firm Watson Wyatt Worldwide (WW). Nearly half said they plan to restore cuts in company contributions to retirement programs this year, although 21% will peg the contributions to company profitability. Nearly two-thirds say they'll restore some level of company match within 18 months. You've got to be in it to get it.

Boyle says that while the additional $5,500 a year catch-up contribution may not sound like a lot of money—and that limit will increase by $500 in 2010—“the compounding effect, without a tax hit each year, is stupendous. In this current administration, with rumblings that a tax hike for the middle class is not off the table, if that’s you, this is tax-deductible money right now.”

The allowable catch-up contribution will increase by $500 in 2010.

Keep in mind, says Mary Claire Allvine, CFP and co-author of “The Family CFO,” what you don’t save this year you do not get to make up the following year.

“Anytime you are not contributing, you can’t go backward,” Allvine says. “You shouldn’t miss financial opportunities.”

For those who want to contribute more to their 401(k)s, but are not sure how to make it happen, Allvine and Boyle offer these tips:

1. Make it an automated deduction. The only thing you need to do is contact your HR department and tell them you want to make catch-up contributions, and tell them how much more you want to contribute.

2. Start with just $10 more a week, if that’s all you think you can afford. Then, next month, increase it to $20, then $50. “Those dollars will never magically show up,” says Allvine. “You need to put them in there. But doing it in increments will make it a little less noticeable.”

3. Do what you need to do to find some extra money. “Stop going out to dinner and start cooking; walk to work,” says Boyle. Everyone has places in their budget they can cut, but it’s not always comfortable.
 
4. If finances are really tight right now, articulate your goals for when things do turn around. “If you’ve had a furlough or a salary reduction,” Allvine says, “decide that when that salary comes back, those first dollars go to 401(k).”

5. The bottom line is you have to make this a priority, says Allvine.

“You have to accept that what you save might be the only money you have for retirement,” she adds. “Instead of getting angry or discouraged, decide that you are going to take charge, and participate in saving for retirement.”

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