At work, many of us have access to 401(k) plans, which are meant to help us save and invest for a comfier retirement. But all isn't well in 401(k)-land. Lots of people are making lots of mistakes with their plans. For starters, more than a quarter of those with access to a 401(k) plan aren't taking advantage of it and using it. That's an especially egregious error if your employer matches your contribution in any way, as many employers do. Nonparticipants at such companies are leaving money on the table -- free money.

In an interview with Employee Benefit News, pension expert Alicia Munnell, coauthor of Coming Up Short: The Challenge of 401(k) Plans, cited six common 401(k) mistakes:

  1. Failure to participate: About 25% of eligible workers do not join.

  2. Low contribution levels: 90% fail to contribute the maximum.

  3. Undiversified portfolios: Almost 60% of participants are either virtually all in stocks or all in fixed-income investments. And those who are in stocks very often have too many eggs in one basket by holding way too much of their employer's stock. Some of those baskets are pretty risky -- think of General Motors (NYSE:GM) stock lately, for example, or Kmart. Or Martha Stewart Omnimedia (NYSE:MSO). (Learn more about GM's troubles, Kmart's challenges, and Martha Stewart's volatility.)

  4. No portfolio rebalancing over time: Very few participants rebalance their portfolios as they age or in response to market returns.

  5. Cash-outs when changing jobs: About 55% of participants cash out their accumulations when they leave their employer.

  6. Failure to purchase an annuity at retirement: Virtually no participants purchase an annuity when they stop working. (Learn more about annuities.)

Munnell also noted that around the turn of the millennium, a typical American household nearing its retirement years had accumulated only $55,000 in 401(k) and/or IRA plans. Clearly, that's not going to be much of a cushion.

In a recent Pittsburgh Post-Gazette article, Pamela Gaynor reviewed other problems with 401(k)s. For example, although people generally want more choices when it comes to investing (along with many other spending categories), they can be overwhelmed by too many choices and often end up doing nothing. Gaynor noted research by the Vanguard Center for Retirement Research, which has found that "for every 10 funds that a 401(k) plan offers beyond the initial 10, participation drops by 2 percent."

Are there any solutions? Fortunately, yes. "We need to make this simpler and set defaults so people are automatically headed in the right direction," Munnell suggests. "We'd have them automatically enrolled in the plan. We'd have a 30-year-old automatically invested in 70% stocks and 30% bonds, which would almost preclude the company stock issue. The investment mix would change by 1% a year as they aged. We would have automatic rollovers when they move from one job to another.... And then when you got to retirement, we'd have automatic enrollment in a joint and survivor annuity." She recommends taking advantage of our tendency toward inertia: "If you put [people] in the right place, they will stay there."

There's much more to learn about the super-duper-critical topic of retirement planning. Start with these valuable articles by Robert Brokamp:

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Longtime Fool contributor Selena Maranjian owns shares of Martha Stewart Omnimedia. The Motley Fool has a disclosure policy.