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.
Mistake 6: Buying too much employer stock in your 401(k). More than 10% is probably too much.
Posted by: Nigel | February 14, 2007 at 03:15 PM