Making the most of your qualified retirement plan takes a little bit of effort. Most plan participants default to a “set it and forget it” mentality because of an investment runway that is decades long. This approach can be detrimental over time as small, missed opportunities bear large, negative consequences. Here are a few common mistakes and steps to avoid them.
1. Not Maximizing the Employer Match
Employers may offer to match a percentage of their employee’s retirement plan contributions to encourage plan participation. Consider this match as no-strings-attached, free money.
Solution: Review your plan participation documents to confirm you’re taking full advantage of employer match maximization. If you are not financially able to contribute up to the match percentage, invest what you can to capture some of the match percentage.
2. Taking Loans From Your Retirement Account
It’s tempting … you’ve amassed a nice sum in your company’s retirement plan. An unexpected expense popped up, and your plan allows loans with a generous pay-back window. Here’s why you should resist borrowing from your retirement plan savings. When you take out a retirement plan loan, you're forfeiting market returns on the money you've borrowed. Also, should you be laid off or leave your job, you will need to repay the outstanding balance quickly. If you are not able to repay the outstanding loan balance, the amount will be considered a distribution and may be subject to both income tax and an IRS 10 percent additional tax for early or pre-age 59 1/2 distributions.
Solution: Ideally, wait until you are financially able to incur the expense. If that’s not an option, find another source of funds.
3. Not Being Aware of Fees Charged by Your Retirement Plan Investments
Not all investments are created equal – and that goes for the plan fees they charge, too. Even what seems like a small difference (e.g., 0.75 percent annually vs. 0.90 percent annually) will add up over time and negatively impact your retirement account.
Solution: Review the prospectus for each of your plan investments as well as other investment choices in your plan. Generally, index funds, which are passively managed, charge lower fees.
4. Failing to Adjust Contributions Following Raises or Contribution Limit Increases
Putting all or a portion of a salary increase toward retirement savings can pay off in a big way. You won’t miss the money and the extra bump in contributions will not only reduce your taxable income but will also have the potential to grow your account balance exponentially over time. Also, keep an eye on changes to contribution limits for employees who participate in 401(k), 403(b) and most 457 plans. In 2025, the limit is $23,500 (up from $23,000 in 2024) – with those age 50 and older eligible to contribute an additional $7,500 in catch-up contributions and participants ages 60-63 now able to contribute up to 11,250 in catch-up contributions if their plan allows. The 2025 limit on annual contributions for IRAs is $7,000, with catch-up contributions capped at $1,000.
Solution: Many plans offer participants the opportunity to automatically increase their contributions each year, up to a certain amount. Ask yourself, “How much should I contribute to my retirement plan?” and consult your plan document.
5. Not Reviewing Your Portfolio Allocations – and Rebalancing, if Needed
Your portfolio should always align with your time horizon, risk tolerance and goals. But because disparate holdings perform differently (especially in times of market volatility), over time your allocation can drift, tilting your portfolio toward a more conservative or more aggressive position.
Solution: Make a habit of reviewing your retirement portfolio allocations. Set a calendar prompt or conduct the review either at the beginning or end of the calendar year, or another point in the year that is meaningful for you.
Working with a financial professional well-versed in the retirement planning process can help you manage – or avoid – these mistakes. Locate a specialist here and set up a free, no obligation consultation.