7 401(k) Mistakes Every Investor Should Avoid

Whether retirement is a few years or decades away, it’s important that investors do what they can to maximize their 401(k) account performance. Here are 7 401(k) mistakes investors should avoid if they want to potentially have more income at retirement.  

#1 Not Regularly Reading Your 401(k) Statements

401(k) mistake investors should avoid
Many employees are apathetic about their retirement savings and don’t even open their 401(k) statements. 

Rather than managing their 401(k)s, too many people hope they’ll have enough saved for retirement.

Although reviewing the statement for your 401(k) plan might not be the most exciting read, it is important that you have a good understanding of the information that is provided to you.

Opening and reviewing your statements also help you determine whether or not you’re on track to meet your financial goals.

Do you open your statement every month? And, do you understand why you get what you get?

If the answer is no to both questions, we recommend you become engaged with your retirement savings. Open your statements. 

If you don’t understand what you’re receiving, then reach out to an expert for help. 

[Download our no-cost guide on how to understand The Different Types of Licenses Financial Advisors Have and What They Mean to You ].

#2 Thinking Your Employer Is Taking Care of Your 401(k) for You

401(k) mistake investors should avoid
Another 401(k) mistake investors should avoid is the belief that their employer–whether past or current–is taking care of their 401(k)s. 

This belief helps disconnect investors like you from your money, potentially keeping you from maximizing your retirement savings. 

Your employer cannot make changes for you

It’s up to you to take charge of your financial future and make sure you know what’s going on with your 401(k) investments. 

#3 Not Making Changes to Your 401(k)

401(k) mistake investors should avoid
In the past, traditional investors have been told to follow a “set it and forget it” strategy with 401(k) or other workplace retirement accounts. 

While retirement savings is a long-term game, a buy and hold philosophy is the #1 mistake 401(k) investors make…and a potentially costly one that may be doing more harm than good

The investments you initially chose to help you meet your retirement goals–whether that was 20 years ago or 2 years ago–may no longer be the best alternatives for you now.

So why would you invest your hard-earned savings into your 401(k) or other workplace retirement account and then forget about it? 

It’s important to make the appropriate changes in order to stay on course and maximize your retirement savings. 

Which leads us to the next 401(k) mistake investors should avoid … 

#4 Failing to Rebalance Your 401(k) Quarterly

401(k) mistake investors should avoid
If you aren’t rebalancing your account allocations, you may be missing out on earning more and keeping more of your hard-earned retirement savings


Because unmanaged allocations may experience much larger losses in down markets and may miss the opportunity for growth during good markets. 

Morningstar conducted a study that monitored the top 100 best-performing mutual funds between January 1, 1998, and December 31, 2013. 

This study revealed that, in any given year of top best-performing 100 mutual funds in any of those years, in the next year, about half of the time, 8 out of 100 remained in the top 100 the very next year.¹ 

This is why a set it and forget it strategy is not always advantageous.

Despite this, few people rebalance their 401(k) account, and even those who do fail to manage risk through proper asset allocation.

In fact, over 80% of 401(k) investors fail to rebalance

Simply rebalancing to your original target percentages isn’t good enough because it does not consider current market and economic conditions. 

This often results in more significant losses during bad markets. The stock or mutual fund that you chose last year–or even last quarter–may or may not necessarily still be going in the right direction for you. 

We recommend rebalancing your account allocations every quarter, or four times a year. This way, you can make the appropriate changes in order to stay on course with your savings goals.

[Click here to discover the difference between account rebalancing and asset allocation, and how account balancing and allocation may affect your 401(k) performance.]

#5 Relying Solely on Target Date Funds

401(k) mistake investors should avoid
Because target date funds (i.e., 2020, 2030, 2040, 2050 funds) are based on the date of retirement, they fail to take into consideration that not all investors are created equal. 

If you’re younger and plan to retire in 2060, you’re told to select a 2060 fund. If you’re wanting to retire in 2030, you’d select a 2030 target date fund. 

What this means is that investors are grouped solely based on their expected retirement date–location, profession, salary, risk tolerance, goals, and objectives are NOT taken into consideration. 

Because everyone has different goals and objectives for the future, there is no one-size-fits-all way to invest in a 401(k) plan. 

In addition, target date funds do not appropriately manage downside risk. 

They may often underperform in good markets and do a poor job of managing downside risk during tough markets. 

If you are currently in a target date fund, we suggest moving away from this option and better utilizing all the options available in your workplace retirement plan. 

[Click here to download our guide 5 Ways Target Date Funds Fail to Live Up to Their Promise.]

#6 Not Maximizing 401(k) Contribution Limits Each Year

401(k) mistake investors should avoid
There is one way that may ensure you have enough to live on during retirement… contribute the maximum amount in any given year

According to Vanguard’s How America Saves,³ only 13% of employees with retirement plans at work saved the then-maximum 401(k) contribution limit of $18,000 in 2017. 

And only 14% of those 50 or older took advantage of plans offering catch-up contributions

The annual contribution limit has been raised to $19,000 for 2019 for employees under 50 who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. This is $500 over 2018. 

For employees age 50 or older, the additional catch-up contribution limit will stay the same for 2019 at $6,000. 

How much you can realistically contribute to your 401(k) depends on how much you earn and the amount of debt you carry, among other factors. 

Even if it’s a stretch, do what you can to save as close to the 401(k) contribution limits as possible. 

Your age does not matter. Even if you are close to retirement, it’s never too late to do what you can to save the most allowed, as it will greatly impact the amount you have at retirement. 

Trust us, your future self will thank you for it! 

#7 Not Taking Advantage of Your Company Match

401(k) mistake investors should avoid
Another 401(k) mistake investors should avoid is not taking advantage of the company match.

Company matching is one of the best ways to maximize your 401(k), and it’s often the most overlooked. 

If you can’t maximize your annual contribution, at least put in enough to get the full company match. 

Because when your company matches you, it’s like getting free money!  

If you aren’t doing it already, you may be leaving a lot of money on the table. 

Because it may increase your retirement lifestyle. And it may help you accumulate the amount of money you desire at retirement. 

Remember, you don’t have to wait for enrollment season to make changes to your 401(k) deferral election. You can make changes anytime during the year.

No matter your age or how much you have saved to date, it’s never too late to take control of your financial future! 

If you’d like to know How To Supercharge Your 401(k) Performance Today, download our no-cost guide. 
401(k) mistake investors should avoid

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  1. The Impact of Expert Guidance on Participant Savings and Investment Behaviors: David Blanchett, Morningstar Investment Management Group, 2014.
  2. “Over 90% of Americans Make this 401(k) Mistake.” Mauri Backman, The Motley Fool 
  3. https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/HowAmericaSaves2018 
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