15 401(k) Mistakes You Didn't Realize You Were Making

401(k)s are among the most popular types of retirement accounts for good reason. They offer high annual limits, automated contributions, and in some cases, an employer match. Plus, you can save money on taxes by stashing some of your money here as opposed to a taxable brokerage account.

But though 401(k)s offer plenty of ways to help you grow your net worth, they can also be pretty complicated. Those who aren't familiar with how to manage theirs properly can end up making some costly mistakes. Here are 15 of those you want to avoid.

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You may think that it's not a big deal if you put off retirement savings, especially if you're young. But every year you delay makes your job more difficult. You won't be able to count on as much investment earnings, so you'll have to save more every month when you do begin to reach your retirement goal. If your company offers a 401(k) match, then you're also forfeiting a bonus by skipping your 401(k) contributions.

It's best to make regular contributions to your 401(k) if you're able to. Most of the time, this money comes right out of your paychecks every month, so you don't even have to think about it once you've set everything up.

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Whenever possible, you should contribute at least enough to your 401(k) to get your full match. Your employer isn't going to give you this money in another form if you choose not to contribute to your retirement account, so you're just leaving extra money on the table by skipping your match.

Talk with your company's HR department or your 401(k) plan administrator if you're unsure how your company's matching system works. Then, look into how much you've already contributed to your account this year and see if you can increase your contributions going forward to help you claim the rest of your match.

Most 401(k)s that offer matches have a vesting schedule. This determines when the employer-matched funds in your account are actually yours to keep. If you leave the company before you're fully vested, you could lose some or all of this match. Your personal contributions are always yours to keep, though.

Check with your employer to learn about its vesting schedule. If you've been with the company for about six years or more, you shouldn't have to worry too much about a vesting schedule. But if you're thinking about leaving your job and it's been less time than this, you could lose some of your match.

Most employers typically invest employees' money in a target date fund unless the employee elects to invest in something else. The default investment option might not be a bad choice for you, but there could be something that better lines up with your long-term goals.

Explore all the options available to you and choose the investment that best aligns with your goals. It could be that the default investment is your best choice, but by taking the time to consider other possibilities, you ensure you're not missing out on something better.

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Some employers who automatically enroll employees in their 401(k) withhold a small percentage of their paychecks automatically. This is a nice feature that encourages participation in the plan, but the default contribution rate probably isn't high enough.

While everyone has their own retirement savings target, the general rule of thumb is to contribute at least 10% to 15% of your income to retirement. Some people even contribute more than 15%. Take some time to figure out how much you ought to contribute each pay period to reach your goal, and then set your automatic contributions appropriately.

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Roth 401(k)s are becoming increasingly popular alternatives to traditional 401(k)s. While traditional 401(k) contributions give you a tax break today in exchange for taxing withdrawals later, Roth 401(k) contributions offer tax-free withdrawals in retirement but don't give a tax break today.

If your employer offers a Roth 401(k), it's worth considering whether it's a smart choice for you. You may also be able to contribute some money to each type of 401(k) if both are available to you, but you should favor the one you think will provide you the most tax advantages.

All 401(k)s have fees, though a lot of people don't realize it because the money automatically comes out of their account every year. Some fees cover record-keeping costs and maintaining the website that lets you access your 401(k). Then, there are fees associated with one-time actions, like rollovers.

There are also investment fees, which vary depending on what you invest your money in. You have some control over these. Look at the investment options available to you and see what each of them cost. For mutual funds and exchange-traded funds (ETFs), fees are often listed as "expense ratios" and are a percentage of your assets. Ideally, you want an expense ratio under 1% if you can find it.

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Some companies give their employees the option to invest in company stock through their 401(k). But this isn't always the right decision for everyone. Even if it does seem like a good move for you, you have to be careful not to invest too heavily in company stock.

If half your savings is in company stock and it takes a dip, you'll lose a lot more money than you would have if you'd just had 5% of your savings in the stock. Make sure you spread your money pretty equally among at least 25 different companies to avoid any single stock affecting your portfolio too much.

When you open a 401(k), you must choose the beneficiaries you'd like to receive your 401(k) funds upon your death. It's important to reevaluate your beneficiaries every year or two to make sure they're up to date.

If you recently got married, you probably want to update your beneficiaries so your new spouse can inherit your 401(k) if you die. And if you just got divorced, you probably don't want your ex getting your life's savings, so you should select someone else for a beneficiary. Talk to your plan administrator to learn how to make these updates.

Most of the time, you can leave your 401(k) where it is when you leave your job, but this isn't always a great idea. For one thing, it's more difficult to manage your retirement savings when it's spread among many retirement accounts.

Your old 401(k) might also charge high fees. If that's the case, you're better off rolling the funds over into an IRA where you can choose from a wider range of investments. This gives you more control over what you're paying in fees and can help you keep costs down.

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Cashing out your old 401(k) is another option if you leave your job, but this is risky. If you move the money into a new retirement account within 60 days, you'll be fine. But if you fail to do so in time, the government will tax you on the withdrawal as if it were a distribution.

It's safer to do a direct rollover if you want to move your money. Tell your old 401(k) plan administrator where you'd like the funds sent. It should have a form for you to fill out. Then, it'll move the money where you tell it to and you won't have to worry about an unexpected tax bill.

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You're free to take money out of your 401(k) anytime you wish, but you'll pay a 10% early withdrawal penalty if you do so under 59 1/2. There are exceptions to this penalty for things like large medical expenses, but taking money from your 401(k) early is still a bad idea. You'll have to save more going forward to have enough to pay for all your retirement costs, and that isn't always easy.

Explore all other avenues of getting the money you need before you withdraw anything from your retirement account. See if you can borrow the money or adjust your spending habits to get what you need. Make sure you have an emergency fund, too, so you don't need to raid your retirement savings to cover unexpected bills.

A 401(k) loan isn't quite as bad as an early withdrawal because you pay the money back with interest over time. But often, you still end up with less than you would have if you'd just left the money alone in the first place.

You could also find yourself facing an enormous bill if you quit your job or you fail to pay back the loan within the designated time frame. Consider borrowing from other sources before dipping into your 401(k).

Over time, everyone's investment portfolio gets a little out of whack. Certain investments perform better than others and tend to make up a larger portion of your portfolio than you originally intended. It's important to correct this to ensure you aren't exposing yourself to too much risk.

Review your 401(k)'s portfolio at least once per year and make adjustments as needed to ensure your portfolio stays balanced over time.

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While 401(k)s have some big advantages, they have disadvantages, too. You're often limited in what you can invest in, and they can be more expensive than IRAs. That doesn't mean you shouldn't contribute to one. But you should weigh its pros and cons.

If you qualify for a 401(k) match, you should definitely claim this first. But afterward, if you don't think your 401(k) is a good fit for you, put your money in a different retirement account instead. If you max that out, move back to a 401(k). Find the strategy that works for you and stick to it.

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A 401(k) is a great savings tool, but if you want to get the most out of it, you have to avoid the above mistakes. If you have any questions about how your 401(k) works, ask your plan administrator or your company's HR department. Don't just assume you know the answer because that could lead to a costly mistake.

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