Five 401k Mistakes to Avoid

Here are five 401k mistakes to avoid as listed by Money magazine:

• Mistake 1: Not participating in your 401(k)
• Mistake 2: Not contributing enough
• Mistake 3: Not investing for growth
• Mistake 4: Borrowing from your 401(k)
• Mistake 5: Cashing out your 401(k)

Here are my thoughts on each of these:

1. Why would someone not participate in a 401k? At a minimum, you should contribute enough to get the full company match.

2. Again, contributing enough to get the full company match is retirement step #1. It's a no-brainer.

3. As long as you have a long-term time horizon of 10 years or so (which most 401k savers will have), you should be invested primarily in stocks to maximize the growth of your funds. Personally, I prefer index funds.

4. Borrowing from a 401k is the #1 mistake on the list of the 12 biggest money mistakes.

5. Cashing out your 401k is a very, very bad idea.

For more on making the most of your retirement, see Best of Free Money Finance: Retirement Posts.

Comments

[Nigel]

Mistake 6: Buying too much employer stock in your 401(k). More than 10% is probably too much.