The Top 3 Mistakes To Avoid With Your 401(k)

In a surprising turn, given the usual grim reports about how little most Americans have saved for retirement, there’s been a spate of good news lately about 401(k) investors. Plan participation, contributions and account balances all were at or near record highs in 2023, according to a study last month from Vanguard. And new research from BlackRock shows that, buoyed by a surging stock market, nearly 70 percent of workplace savers now feel they’re on track for retirement — a 12 point jump from last year.

So, have we finally solved what experts routinely refer to as the country’s looming retirement crisis — at least, for the roughly half of Americans with access to an employer-sponsored savings plan?

Hardly.

That lofty 401(k) balance? Yes, the median shot up an impressive 29 percent in 2023, but the typical account was still worth just over $35,000 by year end, Vanguard reports. Other signs of stress: A record number of savers withdrew money early, and the percentage taking out loans rose too. All told, despite the surface optimism about retirement savings, six in 10 investors told BlackRock they still worry they’ll outlive their money.

“The rising tide for retirement savers has not lifted all boats,” said Christine Benz, director of personal finance and retirement planning at Morningstar.

How to be among those who stay afloat? Avoid the common mistakes that can undermine savings efforts. Here is a look at what experts say are the three costliest stumbles — and how to get back on course.

Saving Too Little, Too Late — by Default

The increasingly widespread adoption of automatic enrollment in 401(k) plans is the main reason more Americans than ever are saving in these accounts. Participation in 401(k)s at companies that automatically enroll their employees hit 94 percent last year, compared to just 67 percent at places where sign-up is voluntary, Vanguard reports.