5 huge 401(k) mistakes

Written by
Peter Dunn

Here are five deadly moves that people should never make when dealing with their 401k.

1. Waiting to contribute until the time seems right. The time will never seem right. You need to get in the game ASAP. As soon as you are eligible, sign up. Don't wait a month. Don't wait a week. In fact, exit this blog entry and sign up now if you haven't already done so.

2. Chasing returns. It is a bad way to invest. Don't just invest in what performed best in the previous quarter because many times those investments have seen their good fortune end. If you are buying what is doing the best, then you are usually buying high. Buying high is not good.

3. Borrowing against your 401k. Your 401k is supposed to provide for you from age 59 1/2 until you die. So let's say that you die when you are 90. That is 30 1/2 years. You have a limited amount of time to put money into your retirement account. Don't use the money prior to 59 1/2. Chances are that the reason that you took the loan is lame anyway.

4. Wasting the match. If your company matches, then make sure that you are contributing enough to get the full match. It is free money. Although Cal Ewing, the Patron Saint of High School Economics, once said, "there is no such thing as a free lunch", there is such a thing as free 401k money.

5. Being too aggressive. Slow down. Breathe. Stop putting 100% of your money into high risk investments. It is not worth the risk. If you want to make your account grow faster, then contribute more. Don't depend on high risk funds to get you to the finish line.

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