I’m a Financial Advisor: You’ll Never Regret Doing These 4 Things With Your 401(k)
Written by
Vance Cariaga
Edited by
Jenna Klaverweiden
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The U.S. retirement system passed an important milestone earlier this year when The Wall Street Journal reported that for the first time ever, half of private sector workers are saving in 401(k) plans.
Not signing up for a 401(k) when you have access to one is a major financial no-no, according to Robert Johnson, Ph.D., CFA, chairman and CEO at Economic Index Associates, professor of finance at Creighton University, and co-author of “The Tools & Techniques of Investment Planning.”
“One of the most important financial decisions anyone makes in their life is the decision to participate in an employer sponsored retirement plan,” Robinson told GOBankingRates. “Perhaps the worst financial mistake anyone can make is turning down free money. [But] many people put such a high priority on paying down debt or buying a home that they do not participate in their company 401(k) plan.”
If you are enrolled in a 401(k) plan, check out these four things you’ll never regret doing with it.
Starting Early With the Right Strategy
The best time to sign up for a 401(k) is when you first enter the workforce. The earlier you get started, the more you can take advantage of compounding that helps your nest egg grow faster.
Once you do sign up, Johnson recommended putting at least part of your money into a low-fee, diversified equity index fund.
“Dollar-cost averaging into an index mutual fund or ETF is a terrific lifelong strategy,” he said. “[You] should be 100% invested in stocks and have no bond exposure [early on].”
Getting the Employer Match
Another important step is to make sure your contribution qualifies for a matching contribution from your employer. That match essentially means you are getting free money.
“People should do whatever it takes to participate in their company’s 401(k) plan to the level to get the full employer match,” Robinson said. “The opportunity loss of not electing to participate in an employer matching program is substantial. If you have a 100% employer matching program, you are essentially electing to turn down the equivalent of 100% of what your own contributions would grow to.”
Maxing Out Your Contribution
The maximum annual contribution you can make to a 401(k) will rise to $24,500 in 2026 from $23,500 in 2025, according to the IRS. If you have the financial resources to do so, aim to max out your contribution every year.
Doing so not only increases your retirement savings but “also reduces your tax bill,” according to Robinson.
Taking Risks
One of the biggest mistakes people make with their 401(k) is not taking enough risk, Robinson said — especially when they are young. Too many young adults gravitate toward money market accounts or low-risk bonds, which might be safe but don’t provide nearly the financial boost you get from stocks.
Robinson cited data from Ibbotson Associates showing that large cap stocks returned 10.3% compounded annually from 1926 to 2024. Over that same time period, long-term government bonds returned 5% annually and T-bills returned 3.3% annually.
“The surest way to build wealth over long time horizons is to invest in a diversified portfolio of common stocks,” Robinson said. “Someone with a long time horizon should not have exposure to money market instruments, yet many investors do because they fear the volatility of the stock market.”
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