What are the major mistakes workers make managing their 401(k)s?
• They don’t participate. Of all employees eligible to participate in a company-sponsored 401(k) plan, 30 percent choose not to. • For those who participate, many start too late, and when they do start, their rate of saving is too low. (According to the lastest report from the Federal Reserve, the average family’s account balance in a 401(k) is only $29,000.) • Half the people with 401(k)s cash them out when they change jobs, despite the tax penalties for doing so. They use the money for bills, or on a down payment for a house, a vacation, education expenses, etc, instead of rolling the money into an IRA or another 401(k). It means the money’s not there when they come to retirement. • 401(k) investors aren’t aware of the fees and costs charged by the managers of 401(k) plans (usually mutual fund firms). These fees and costs compound over time and eat up a huge chunk of the employee’s investment returns. John C. Bogle, founder of the Vanguard mutual fund firm, says that over several dec
