Suze Orman Warns You're Leaving Money on the Table if You Make This 401(k) Mistake

Don't put your retirement at risk by making this big error.

A 401(k) is a great retirement account for many people. Unlike an IRA account, which is a retirement account you open with a brokerage firm of your choosing, your employer manages your 401(k) account (although you do pick the investments within it). You have contributions taken directly from your paycheck, which are made with pre-tax dollars, so a 401(k) is a very convenient way to invest for the future.

However, finance expert Suze Orman has warned that unfortunately, many people are making a big mistake when it comes to this type of investment account.

Are you making this 401(k) mistake?

According to Orman, many people are unknowingly making an error with their 401(k) through no fault of their own, which unfortunately leaves their retirement account balance lower than it should be.

"If you changed jobs recently and just relied on your plan to 'auto-enroll' you, there's a good chance you are leaving money on the table," Orman explained. "It's not your fault! Your plan automatically chose a starting contribution rate that is too low to qualify for the maximum match. Grrrrr. Call up HR and find out what your contribution rate needs to be to qualify for the max match. Make the switch ASAP."

Orman said as many as one in four workers could potentially be unknowingly making this mistake. But the good news is, once you are aware of it, it's not difficult to correct it.

How to avoid this error and make the most of your 401(k)

The best way to avoid leaving money on the table is to find out exactly what the rules are for earning your full employer matching contribution.

A matching contribution is money your company puts into your 401(k) when you make a contribution. Different companies have their own rules for how they work. For example, some companies match 100% of contributions up to 4% of your salary, or 50% of contributions up to 6% of your salary, or some similar breakdown.

Once you have found out exactly how your company contributes, you can sign up to contribute enough to earn the full match.

So, for example, if your employer matched contributions up to 4% of your salary, you'd want to be sure you were investing at least that much in your retirement account. You may want to invest more, since most experts recommend saving 10% to 15% of your income for retirement Or you may opt to invest only enough to earn the full match and then put the rest of your retirement money in another type of tax-advantaged account. But you'd want to be sure you were maxing out that match before doing anything else first.

Changing your contribution amount is usually a simple matter of filing out some forms or making an adjustment in your online account; you can ask HR or your 401(k) administrator how to do it. It's a task you should tackle ASAP so you don't leave free money on the table that your employer would otherwise provide to help you have a more secure future.