On its surface, a 401(k) is a pretty simple idea: You set aside a portion of your paycheck, that money gets invested, and eventually, you sell those investments and live off of the profits. However, as anyone who's ever owned a 401(k) knows, things aren't always that easy in practice. 

There are plenty of simple 401(k) mistakes that can make your life a lot harder. Here are three to do your best to avoid in 2022 and beyond.

Two people looking at paperwork together.

Image source: Getty Images.

1. Not contributing

If you don't contribute anything to your 401(k), it can't help you grow your wealth. That's not a revolutionary idea, but a lot of people still skip their 401(k)s every year because retirement isn't a priority for them.

You might think you have plenty of time left to save for your future, but the longer you wait to start saving, the more challenging you're making the job because you can't count on as much investment earnings. The earlier you set up a retirement savings habit, the more likely you are to actually live the retirement you envision. 

You don't have to stash your money in your 401(k) if you don't want to. There are times when an IRA might be a better fit. But a 401(k) is definitely worth keeping in mind, especially because it has much higher contribution limits. You may contribute up to $20,500 in 2022 or $27,000 if you're 50 or older. That kind of cash can go a long way toward setting you up for a comfortable future.

2. Not claiming your 401(k) match

There are only a few good reasons for not claiming a 401(k) match. The first is if you absolutely cannot spare any cash for retirement savings because you need all your income to pay your bills. If this is the case, skip the match, but look for ways to give yourself a little more breathing room. That could mean scaling back on some expenses, downsizing, or finding a better-paying job. Then you can focus on your 401(k) match.

The other people who may want to skip their 401(k) match are those who aren't going to be at their jobs very long. Many employers have vesting schedules that determine how long an employee has to work for the company before they get to keep their 401(k) match if they quit. If you've only been with the company for a few months or years, you could lose some or all of that match when you leave your job. You can check with your company's HR department to find out if you're fully vested.

If neither of these two issues apply to you, your 401(k) should be the first place you stash your retirement savings in 2022, at least until you've gotten the full match. If you skip it, you're basically turning down a bonus from your employer -- and who says no to extra cash?

3. Not evaluating your investments carefully

Think for a minute: Do you have any idea what your money is actually invested in? If not, you probably want to find out quickly. Your investments dictate how fast your savings will grow and how much you pay in fees every year, so it's important to make sure you've made the best possible choices. 

Some companies automatically invest employees in a target date fund or something similar unless they choose different investments for themselves. Target date funds are nice because the assets in the fund are designed to become more conservative over time. So you can take advantage of riskier, high-reward assets when you're younger and then switch to safer investments as you age to protect what you have. And you never have to lift a finger.

But these funds are often expensive, and they may not fit in with your plans for retirement. If your employer enrolls you in a 2050 target date fund but you actually don't plan to retire until 2060, your money may be invested too conservatively and hampering the growth of your savings.

That's why it's important to review all of your investment options and look for the one that best aligns with your long-term goals. Keep in mind that these may change over time. You may want to make a habit of looking over your investments annually to make sure they're still your best options.

You should also keep a close eye on how much you're paying in fees. Your investments will have fees of their own, which you can find in the prospectus. They're often written as an expense ratio, which is a percentage of your assets. You should try to keep these below 1% whenever possible. 

Your 401(k) will likely have other fees associated with it as well. You can't always control these, but it helps to know what they are. This can help you decide if your 401(k) is right for your savings goals after you've gotten your match. Knowing your fees might also help you avoid some of them. For example, you might think twice about taking a 401(k) loan if you'll have to pay a fee on top of taking money out of your savings. 

Much as we'd all like to set up our retirement plan and then forget about it until we're ready to withdraw our nest egg, that's not the way it works. We get the most out of our 401(k)s when we pay attention to them. Our goals and investment strategy can shift over time, so the only way to keep our 401(k)s working well for us is to keep revisiting our plans, at least once per year. Make it part of your year-end routine to consider these three points, altering your savings plan as necessary to keep you moving in the direction you want.