4 Big 401(k) Mistakes to Avoid in 2020
Having access to a 401(k) plan means getting a solid opportunity to build a large nest egg for retirement. But if you're not careful about how you manage that plan, you could wind up missing out on the opportunity to really build wealth. Here are a few 401(k) mistakes you should make every effort to avoid in the new year.
Matching contributions are a huge perk associated with 401(k)s, and not capitalizing on your employer's generosity is a mistake that could really haunt you for years. When you fail to snag your match, you give up free money, as well as potential growth on that money.
Say your employer matches contributions of up to 5% of your salary and you earn $65,000 a year. This means that if you put $3,250 from your own salary into your 401(k), you'll get another $3,250 from your employer. If you don't collect that $3,250, you'll potentially lose more than just that sum, though, because if your 401(k)'s investments typically generate an average annual 7% return -- a reasonable assumption for a stock-focused strategy -- not having that additional $3,250 invested for 30 years means shorting yourself of almost $25,000 in missed growth. And that's more of a big deal.
Source Fool.com
