Retirement plans are an important part of your financial preparation and strategy. Your 401(k) is one of the best retirement investment accounts you have and is easily established through your employer. Add tax-free or tax deferred growth and matching employer contributions, and you will have a retirement plan to power the country.

However, the biggest retirement plan mistakes include ignoring your 401(k) and forgetting to contribute to your workplace retirement account. Here are 9 biggest retirement plan mistakes to avoid. Most of these 401(k) can be avoided with the help of smart retirement plans and professional retirement counselors.

401(k) may cost you error

Most experts believe that a 401(k) is one of the smartest ways you can save for retirement.

But, according to 2025 Transamerica’s study, “Retirement in the United States: The Outlook for the Workforce”*, it’s a gain, with about one-third of middle-class Americans immersed in retirement funds before actually retiring. If you do this, you may put your future financial insurer at serious risk. Exiting 59½ from 401(k) usually means paying a 10% fine in addition to any income tax. The cost of a decision may be more than 30% of the withdrawal amount.

These are some common retirement plan mistakes:

1. Don’t know the type of 401(k) account

When it comes to 401(k) accounts, most people can choose between two main types: the traditional 401(k) and the Ross 401(k). The difference between them can have a significant impact on your retirement strategy.

With the traditional 401(k), your donations are made before taxation, so you lower your current taxable income. However, when withdrawing money from 401(k) after retirement, you will pay taxes later. Depending on your current tax rate, this can provide today’s major tax advantages. A traditional 401(k) might be a good option if you think you are at a lower tax rate when you retire and start withdrawing.

On the other hand, the Roth 401(k) is funded by after-tax income, which means you pay tax on the income before funding the Roth 401(k). Your 401(k) withdrawal (including any investment growth) is fully tax-free when retired. If you expect tax rates to rise in the future, or if you will be in a higher tax range when you retire, this account may be good for you.

2. No routine habits

It’s easy to think that when you feel safer, you will start saving later. However, if you are under savings, skip 401(k) contributions, or gradually increase 401(k) contributions as your income grows, which can seriously affect your retirement savings in the long run.

The good news is that getting started is easy. You can set up 401(k) to automatically deduct donations from your salary so that you can save and invest automatically.

Many plans also allow you to schedule an automatic increase in contribution rate every year. This way, you will contribute even more every year. These automatic increase usually stops once it reaches 10%, although some plans make you speed up to 15%.

3. Don’t know how to invest 401 (k) funds

When they first set up 401(k), many people just chose some funds and would never look at them again. But do you know what you actually invested in? If you don’t know where the 401(k) money is, what you’re paying for, or the performance of your investment, you’re making a big mistake.

At Barbarafriedbergpersonalfinance, we use free authorized planners to check investment expenses and calculate how to meet our retirement goals.

Some people simply stick to default investments, usually target date funds related to their expected retirement age, never scrutinized. This may be your best approach. However, make sure you don’t pay the fee.

Your plan needs to send you a fee disclosure annually, so don’t ignore it. If you find the program expensive, it may make sense to invest in a lower cost option only if you contribute enough to get the employer’s game and then put any additional savings into the IRA.

4. Missed all employer contributions from your 401(k)

Many companies offer matching a portion of your 401(k) donations, which is a great way to increase your savings. For example, your employer may match 50% of your contribution, which can be up to 6% of your salary, which is essentially free.

If your contribution isn’t enough to get a full match, you’ll miss out on the free money. Financial experts have been recommending at least enough to capture the full employer competition, as it can greatly accelerate the growth of retirement savings. Remember that these matching funds usually come with a vesting schedule that may take several years.

5. Forgot the old 401(k) account – Should I scroll 401(k)?

It’s easy to forget your 401(k) every time you leave work. However, forgetting the old account can result in 401(k) scrolling errors and potential losses.

You have some options to handle 401(k) from your previous job, you can leave it in place, transfer it to the 401(k) of your new employer, or transfer 401(k) to your IRA.

For example, leaving your account to a former employer, especially smaller employers, may eventually need to take action and may even lead to forced cash sale, which can trigger taxes and fines. Plus, having multiple past employers with multiple accounts may keep managing your investments and keeping them organized.

The benefit of rolling toward an IRA is that you can usually lower your investment management fees. You can also choose to invest at lower fees and more. Rolling 401(k) into your IRA gives you more control over your investments and expenses.

6. Switch jobs before fully attributing

If you leave work too early, you may lose your employer contribution to 401(k). “Affiliation” means you have to stay in the company for a certain amount of time to fully own the money. Learn what you gave up and how long you need to stay at the company to keep all employers 401(k) matches.

Often, people expect an estimated salary increase of 10% or more when changing jobs, but few people have a wise step to maintain or increase their retirement savings rate after pay increases. As income grows, it’s easy to ignore adjusting your savings and investments, but not doing so, which means you may be underselling.

7. Prepare early

One of the worst things you can do for retirement savings is to think of 401(k) as a piggy bank, whether you are cashing out, lending or getting hard. While it may be tempting, early extraction from 401(k) can seriously damage your retirement plan.

If you cashed out 401(k) before age 59½, you usually get a 10% fine from the IRS, as well as the amount you charge for income tax. While many plans do allow for loans or hard withdrawals, they often come with expenses. Even without additional fees, if the money stays invested, your money may earn potential growth.

8. Obsessed with your balance

Checking your 401(k) balance every day or weekly will not help, especially when the market is down. Investing in stocks and bond funds means learning to accept the normal ups and downs of the financial market. The reason you charge interest from a savings account is higher than your return on your investment is because you need to tolerate investment price fluctuations. Retirement investment is a long game. Believe in the process and try not to fluctuate in the short term. And don’t sell after the market falls, otherwise you may not return to the market in time to profit from the rebound of investment prices.

Those who have been in the market for decades and avoid panic sales, long-term gains are often higher when the stock price falls than those who try to time the market and figure out when to buy and when to sell.

9. Put too much money into company stocks

Loyalty to your company is high, but putting a large portion of 401(k) into your company’s stock can be risky. If something happens to the company, you may lose your job and most of your retirement savings at the same time. Diversifying your investment is safer.

According to the Financial Industry Regulatory Authority (FINRA), it is best to limit your investment in your company’s stock to 10% to 20% of the 401(k).

The biggest retirement plan error summary

Your 401(k) can be a powerful tool for building a safe financial future, but only if you avoid these common 401K mistakes and participate in your retirement plan. Take some time to understand your account, align with your savings, and keep an eye on the big picture. You can also consider professional guidance through a self-guided retirement plan and help develop your strategy. There are some wise moves today and you will thank yourself once you retire.

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