It's important to save for retirement, and 401(k) plans can be a smart place to put your retirement savings. But it's important to use the investment options that 401(k)s provide correctly in order to avoid big mistakes.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at a key mistake that retirement investors are making with target-date funds in their 401(k)s. Dan discusses a survey from Aon Hewitt and Financial Engines that found that more than half don't use target-date funds as one-stop investment choices, instead combining them with other investment options in a way that often leaves them mismatched. As a result, the survey found that investors earn two percentage points less in annual returns than they would with only a target-date fund. Dan concludes that it's important to use your 401(k) properly, understanding the role that target-date funds play and the diversification they offer.
How to get even more income during retirement
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Have general questions about Social Security? Email them to SocialSecurity@fool.com, and they might be the subject of a future video!
Dan Caplinger has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.