The 401(k) is one of the most powerful retirement tools out there, so if you're lucky enough to have access to one, take advantage of it.

As of 2019, you can contribute up to $19,000 per year to your 401(k), which is more than three times the annual amount you can save in a traditional or Roth IRA. Many employers also offer matching 401(k) contributions, which are essentially free money. But even if you're contributing a portion of each paycheck to your 401(k), there are still a few mistakes that could be detrimental to your retirement savings.

401(k) written in gold letters

Image source: Getty Images.

1. Paying too much in fees

Everyone pays fees when they invest in a retirement account (whether it's a 401(k) or other type of plan), but not everyone fully understands what they're paying. Nearly four in 10 Americans (incorrectly) believe they're not paying any 401(k) fees at all, according to a survey from TD Ameritrade, and another 22% aren't sure if they're paying fees or not. Even if you are aware you're paying fees, exactly how much those fees are costing you could come as a surprise.

The average U.S. worker paying a fee of 1% of total assets managed can expect to pay roughly $138,000 in fees alone over a lifetime, a report from the Center for American Progress found. As if that number isn't shocking enough, if that same worker were paying an annual fee of 1.3% instead, the total lifetime fees would jump to around $166,000. So, even though paying just a fraction of a percent more in fees may seem like it wouldn't make a noticeable difference, in reality, it could cost you tens of thousands of dollars over time.

To figure out what you're paying in fees, you can either comb through your 401(k) statements or talk to your plan administrator. The average 401(k) plan charges around 1% in total fees, according to the Center for American Progress, so if you're paying more than that, it might be worthwhile to look into other options.

Even if you find you are overpaying in fees, keep contributing enough to earn the full employer match. Free money is still worth more than any fees you might be paying. Then after you've maxed out the employer match, check out a few IRA options to see if you could be paying less by investing elsewhere.

2. Not contributing enough to earn the full employer match

You know that it's important to earn the full match, if your employer offers one. If you don't contribute at least that much, you're missing out on free money. However, you may not realize just how much of an impact it can have on your total savings.

For example, say you're earning $60,000 per year and your employer will match your 401(k) contributions up to 3% of your salary, or $1,800 per year. Let's also say you're currently contributing $1,000 per year, which your employer matches, and you're earning a 7% annual rate of return on your investments. Here's what your total savings would look like over the years if you were to continue saving at that rate versus if you had increased your contributions to earn the full employer match:

Number of Years Total Savings When Contributing $1,000 per Year + $1,000 From Employer Total Savings When Contributing $1,800 per Year + $1,800 From Employer
20 $82,200 $147,600
30 $189,300 $340,100
40 $400,100 $718,700

Data source: Author's calculations.

In this scenario, contributing an additional $800 per year (or around $67 per month) to your 401(k) and earning the full employer match can result in nearly doubling your overall savings.

The difference can be even more dramatic as you earn pay raises, too. As your salary increases, so does the dollar amount your employer will match. So, if you're still not saving enough to earn the full match, you're potentially missing out on even more free money.

3. Cashing out your entire balance when you leave your job

When you leave a job, you have a few options when deciding what to do with the money in your 401(k): You can leave it alone and simply let your savings grow, you can roll the money over to an IRA, or you can cash it out and withdraw all the funds. If you choose the third option, you could be hurting your savings more than you think.

There are several consequences to withdrawing your retirement savings when you switch jobs. First, you'll likely be subject to a 10% penalty fee as well as income taxes on the amount you withdraw if you're under age 59 1/2. Second, withdrawing your money -- even if you stick it in a savings account -- can cause you to miss out on long-term growth. 

Say the money in your 401(k) was earning a 7% annual rate of return. If you withdraw your cash and throw it in a savings account, you may only be earning a 1% or 2% return on your savings. Even if you reinvest it later in a new 401(k) or IRA, the time your money sat in a savings account is time that it wasn't reaching its full potential. Depending on how much money you withdrew and how long it was in a savings or checking account rather than another retirement account, you could be missing out on thousands of dollars in potential earnings.

Your 401(k) can help you build a healthy nest egg, but only if you use it strategically. By avoiding these common missteps, you can make the most of every dollar and save even more for retirement.