9 Mistakes to Avoid in Your 401(k)

As financial planners, we have been helping business owners, their employees, individuals, and families save for retirement for over 25 years. Throughout our journey, we have seen repeated mistakes and want to help prevent the same things in our client’s retirement portfolios. 

We have outlined some 401(k) mistakes below in hopes these warnings and tips will help our clients and their families. While not entirely comprehensive, we believe this summary will help others get started thinking about and making more responsible investment decisions. 

Our goal is to help all of our clients get to a financially secure lifestyle. If you are interested in hearing more, please request an invitation to one of our upcoming online workshops, which will cover these topics and more, in greater detail.

  • Mistake: Not maximizing your employer’s match. Do you know what your employer’s match is on your 401(k)? We believe this is one of the most important things you can do as it’s the only place in investing where you can get a 50% return on the first day. So, if your employer is offering a match on your 401(k), it is almost always in your best interest to take advantage and contribute the same dollar amount as the employer to receive the full employer’s match. Unless, of course, you have financial obligations that prevent you from doing so. Many people call this employer match “free money.” At McClure Wealth, we believe benefits are an earned privilege of employees; therefore, it’s not free. You worked for it, so take advantage of it.
  • Mistake: Selling at the lows. Many people get worried when an investment or stock begins to trade lower. They fear there is no bottom and that they will lose a lot of money. While this could potentially be the case, usually sound investments rebound after a market dip and recover to previous levels (see example below). The volatility and cyclical nature of markets are why it’s usually best to have a long-term view and not sell investments just because they are trading lower. If there is a valid reason you believe the instrument will continue to trade lower, we suggest speaking with us about it and pulling additional research to evaluate whether that decision may serve your best interest.

  • Mistake: Making too many trades. Engaging in too many trades can be costly. Remember that you have to pay taxes on any investment gains, and each time you place a trade, there are likely some commissions, expenses, and the fees involved. It is usually better to stay invested, wait, and watch, rather than try to day trade and time the market.
  • Mistake: Not doing your research. Do you invest based on tips you hear from people? This strategy is usually not a great idea as you can’t be sure of why someone is making an investment recommendation or if they genuinely believe in the underlying fundamentals of an investment. Also, if they are not a Certified Financial Planner (CFP), or other credentialed advisor, be very wary of any tips.
  • Mistake: Bad financial behavior. Excellent financial behavior is having a goal and sticking to it. There are many biases involved in financial markets, and many unnecessary changes made to sound investment portfolios. Don’t let yourself fall privy to one of them. One of the best recommendations is living below your means and maxing out your 401k. You never know when you might need extra cash flow in case of a medical emergency or life circumstance, which leads us to our next point. Spend less than you make. 
  • Mistake: Not budgeting. Do you know if you can save more money in your 401(k) and other retirement accounts? It’s not easy being ruthless with expenses, but sometimes that’s what needs to happen to focus on your finances and future. Do you know where your dollars are going? Do you spend a lot of money dining out? At the movies? On gifts, traveling, or electronics? Take a hard look at your expenses and see what you might be able to cut to have a more secure financial future. 
  • Mistake: Not starting early enough. Did you know that if you put $6K into a retirement plan, with a $3K employer match and a 7% growth rate for 40 years, you would have $1,922,486 at retirement? On the other hand, if you put that same amount in for 20 years, you will only have $394,786.59. That is the power of compound investing. Therefore, time is an essential variable, and the sooner you start, the better. We consider 10% of earnings as the minimum amount one should put away in their retirement plan. Depending on age and time horizon, some people may want to contribute more.
  • Mistake: Not being aggressive enough when younger. In investing, most financial professionals will agree that it’s best practice to be more aggressive in the markets when you are younger and less aggressive as you near retirement. The rule of thumb is to reallocate around the age of 55. This evaluation helps determine risk levels and how to adjust allocations as time goes on. We believe younger savers can weather some market downturns, so typically allocate a more significant percentage of their portfolios in stocks. 
  • Mistake: Not passing on knowledge to the next generation. In our financial practice, we believe financial wellbeing starts early and that teaching your kids some basic knowledge of savings and investing is always a good idea. At McClure Wealth, we commonly invite families into our office for family sessions to help nurture a saving mindset from an early age. If you are financially responsible, consider supporting the next generation by sharing tips, experiences, and stories that will help those behind you get ahead. 

Have more questions about your 401(k)? Are you a business owner that wants to start one for your employees? Want to be a better retirement saver? Reach out to us at McClure Wealth to schedule a phone consultation to see if we might be a good fit for helping you on your retirement journey. Help is just a phone call away: 760.607.0611. 

Are you a client at McClure Wealth? If so, we can help you determine how likely it is that you are on track with your financial plan using risk modeling and assumptions on income and savings rates. A financial plan will help you worry less and work more. Send us an email at [email protected] to set up a remote or in-person appointment. 

We look forward to hearing from you. 


Registered Representative offering securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker dealer and a registered investment advisor. Member FINRA/SIPC. McClure Wealth Management and IFG are unaffiliated entities.