NEW YORK (CNN/Money) - If getting your financial house in order was among your New Year's resolutions, the best place to start is with your 401(k).

Your company's 401(k) retirement plan offers you one thing you'll get few other places--free money. For every dollar the average worker puts into their 401(k) retirement plan, their employer contributes 50 cents.

But the biggest mistake most workers make is not contributing at all.

"Many people don't even contribute to a 401(k) plan when given the option. And of those that do contribute, 75 percent contribute a fraction of what they could contribute," said Dallas Salisbury, the President and CEO for the Employee Benefit Research Institute.

What can you do to get the most out of your 401(k) in 2004?

The one step most people skip entirely is figuring out just how much money they'll need to retire. Fortunately, most companies have Web sites that allow employees to track their 401(k)s online and to calculate how much they will need to save for retirement.

CNNfn's Gerri Willis shares five tips on how to get the most out of your 401(k) in 2004. Play video (Real or Windows Media)

CNN/Money.com also has a number of financial calculators as does Fidelity's Web site, 401k.com.

Many employers are cutting or reducing the amount of money they spend on retiree health coverage, so if the present trend continues you may be responsible for your own health insurance.

As of 2000, just 11 percent of private employers offered their retirees health insurance coverage, according to the Employee Benefits Research Institute.

To get a sense of how much health care premiums could cost you, go to Choosetosave.org and click on the retiree health savings calculator. As you analyze your needs, take into consideration any other resources you could tap, such as savings outside your 401(k) account or real estate.

Maximum contribution limits for 401(k) investors will go up to $13,000 from $12,000 last year and if you're over 50 you can contribute an additional $3,000 to your account.

High earners take note: If you contribute to a 401(k) at a high rate, the IRS may require your contributions and the match to be cut before you get the maximum amount of dollars from your employer.

Check with your benefits office to make sure you're getting the entire match.

Whether you're saving in a 401(k) for the first time, or reassessing your current savings, make sure the mix of investments you have is right for your age and the amount of risk you're willing to take on.

For example, if you plan to tap your retirement nest egg in three to five years, a 70 percent investment in bonds with the remaining 30 percent in a mix of small cap, large cap and international stocks makes sense.

If you're just starting out, however, you have more time to weather market shifts. A more aggressive portfolio with 80 percent invested in stocks and 20 percent in bonds would suit your retirement goals.

Diversification has a bigger impact on your returns than which funds you choose. If you already have a 401(k), check to make sure that your stock allocation hasn't gotten out of control. Last year's bull market may have skewed your allocation mix.

Salisbury, who also wrote Essential Finance: IRA and 401(K) Investing, says investors should think about how much money they can afford to lose and tweak their allocations based on their own risk tolerance.

Want to know the best combination of stocks, bonds and cash for you? Log onto CNN/Money.com or Vanguard.com for details on their asset allocation calculator.

Diversification is crucial, but the funds you choose should have a solid track record compared to other funds in the same category. In other words, compare small cap funds with other small cap funds and international funds with other international funds.

The easiest way to make these comparisons is to visit Morningstar.com and check their fund reports. Look for funds with above average performance for the past three to five years, rather than last year's winners.

First-time fund pickers should consider investing in index funds to cut costs. A large cap index fund is a good way to start, and then you can fill in with international, small cap and bond funds.

Also, try to avoid funds with heavy investments in your company if you already own their stock. One way to do this: Use Morningstar's X-Ray tool.

Salisbury says funds caught in regulators' crosshairs, such as Putnam, Janus and Strong, may actually be the safest place to invest because they have been forced to react to the crisis and enact investor protection guidelines.

Morningstar, however, has advised investors to leave some fund families. This is easier said than done for some 401(k) investors whose plans only offer funds from one of the fund families accused of fraud.

If you are determined to rid your portfolio of scandal-tainted funds, find out whether your plan has a "window" that allows you to opt out of the plans basic offerings and choose from thousands of other funds. According to Salisbury, the feature is pretty common these days, and you may be able to convince your program's administrators to add it if they don't already allow it.  

Gerri Willis is the personal finance editor for CNN Business News. Willis also is co-host of CNNfn's The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to 5tips@cnnfn.com.