Top 5 Biggest Mistakes You'll Make With Your 401k

If you work for a company that offers a 401k plan, you have the opportunity to save an incredible amount of money for retirement.

But the odds are...you won't.

It's way more likely that you'll blow your chances at a life of luxury by making one or more of these common mistakes with your 401k:

1. You won't participate, or you'll wait until it's too late. When you're just starting out retirement seems so far away. But it sneaks up on you faster than you can imagine. If you don't start contributing to your 401k as early as you can you'll be missing out on some serious opportunities for growth.

2. You won't contribute anywhere near enough. Most people grossly underestimate how much money they'll need in retirement. They don't save anywhere near enough to live comfortably in their golden years.

Save as much as you can afford. And then save a little more. At least save enough to take full advantage of your company's matching contributions.

3. You won't diversify your assets. Diversifying simply means not keeping all your eggs in one basket. Remember those poor folks at Enron who invested their entire retirement account in company stock? Think they'd like to go back and diversify their portfolios a bit?

4. You'll treat your 401k like an ATM. Borrowing from 401k plans may seem like a good idea. After all, the interest you pay on a 401k loan goes right back into your account. But if the market surges forward you'll be left in the dust.

Unless you're suffering a severe financial hardship, resist the temptation of borrowing from 401k plans.

5. You'll cash out early. It's tempting to simply cash out your 401k when you switch jobs. But the taxman will be the only one smiling. Not only will your distribution be considered taxable income, but you'll get slapped with a 10% penalty tax if you're under age 59 1/2.

Ouch! That's gonna leave a mark.

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