Don't Make These 401k Mistakes

A 401(k) provides you with a great way to save for the future. Unfortunately, however, this doesn’t mean that you can’t mess things up. Even though a 401(k) may seem pretty foolproof, people still make common mistakes with their retirement accounts that could end up costing them big. Make sure that you’re not guilty of any of the following.    

Mistake #1: Saving Without a Strategy

One big mistake that many people make with their 401(k)s is just saving randomly. They don’t have a clue how much money they’ll need in retirement or how much savings they need to be aiming for, so they just sock the money away with no real plan or strategy.

Don’t make this error yourself. Consider working with a financial adviser to determine approximately how much you’ll need in retirement. Then, you can start working toward that figure in a logical, pre-planned way...which is a whole lot better than just tossing money into your account and hoping for the best.

Mistake #2: Getting Hit with Fees

Fees are pretty much an inevitable part of having a 401(k), unfortunately. If you’re not careful, though, you could end up facing so many fees that they negate some or even all of what you’ve saved, which defeats the whole purpose of having a retirement account in the first place.

To avoid this problem, make sure that you are aware of the fees charged by your plan and that they’re reasonable compared to other 401(k) plans of similar size. Then, keep track of when these fees are assessed and come up with a plan to help you compensate for the loss of fees so that your account stays healthy and beneficial to you.

Mistake #3: Getting Your Investments “Out of Whack”

If you’re smart, you engage in asset allocation to try and keep your investments balanced and consistently beneficial to you. However, you can’t just balance your investments once and then leave it at that. Most accounts need to be rebalanced fairly consistently to keep everything going the way you want it to. To take some of the pressure off you, you may want to try an automatic rebalancing program or simply hire an investment adviser to handle this “balancing act” for you.

As you can see, it’s easy to make mistakes with your 401(k), but it’s also easy to avoid them if you are aware of common blunders and their solutions.