Smart Retirement Savings

5 Biggest 401(k) Mistakes

This article is a must-read for those who are new to the 401(k) game -- any of the five mistakes can cost you dearly.

The average American commits five big blunders in planning for retirement, and their cumulative effect can turn potential millionaires into permanent paupers. It doesn't take an act of Congress to correct them. It takes the kind of sensible planning you already do to buy a car or, in Peter Lynch's famous example, a refrigerator. That famed stock picker said investors pay less attention to their portfolios than their appliances.

The five big mistakes are failing to save hard enough; neglecting to maximize returns while controlling risk; relying too heavily on the stock of their employers; fumbling rollovers; and scalping themselves with heedless borrowing from their own nest egg.

Compounded over a lifetime, the smallest mistakes can have life-changing results. Ignoring expenses can clip 10% right off the top. I'll show you one example where a thoughtful choice involving just a few thousand dollars in your 20s can buy you a second home in the sun when your old bones need it most.