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American employers are increasingly dropping pension plans, and that means workers are increasingly counting on 401(k) retirement accounts to provide financial security in their golden years. To get the most out of your account, be sure to avoid these three mistakes that could derail your 401(k).


One of the worst things you can do with your 401(k) account is to cash it out when you change jobs. Yet many people do just that. Recent data from Fidelity Investments, which administers many companies’ 401(k) plans, shows that 35% of those plans’ participants cashed out their accounts last year when leaving their jobs.

A 401(k) is supposed to be a retirement savings account, not just a handy place to accumulate money temporarily. Considering that fewer and fewer Americans have the luxury of guaranteed pensions for retirement, and the average Social Security benefit is about $1,328 per month as of January 2015 (that’s only about $15,900 annually), most of us need to be stocking away lots of money on our own for retirement.

Fidelity also noted that among its plan participants in their 20s through 40s, the average cashed-out account balance was $14,300. Sure, after cashing out, you might start contributing to a new 401(k) account, but you will have lost a meaningful sum, significantly shortchanging your future.


Another huge 401(k) mistake you can make is paying more than you have to in fees.

Over time, the difference between 0.50% and 0.05% in annual fees is massive. Think thousands of dollars in potential lost money over the course of your career. So, you need to pay close attention to fund choices in their 401(k). Sometimes a better deal is right under your nose.


 One of the biggest 401(k) errors is not taking full advantage of money that your employer is willing to contribute to your account. Many employers make contributions in two different ways: They add profit-sharing contributions to employee accounts that are based on a percentage of your overall salary, and they match any contributions that you make on your own behalf up to a certain amount. Both of these types of contributions amount to free money from your employer, and it’s worth the minimal effort to claim it.

Most of the time, you don’t need to do anything to receive profit-sharing contributions. But with employer matching, it’s critical to save at least enough to maximize the amount of your employer’s contribution. Typical 401(k) plans will include provisions that match half of your contributions up to a maximum of 6% of your total salary, but some are much more generous, matching your contributions dollar-for-dollar or providing matching on even higher percentages of your total pay. Even though employer matching and profit-sharing are sometimes subject to vesting requirements that can make them disappear if you don’t stay at the job for a minimum period of time, your contributions are always yours to keep, so there’s no risk yet huge potential reward when your employer offers 401(k) matching.

Source:USAToday: Feb 1, 2015 -3 critical 401(k) mistakes to avoid

I want to help you with your 401(k) plan and outline a plan for a retirement income you cannot outlive. So, let’s get started today! Contact my office at 1-866-471-7233 | MD, VA & DC. Freeman Owen, Jr - Host of SAFE MONEY TALK on CBS The Big Talker 1580AM