Financial expert Jean Chatzky reveals key mistakes to avoid when managing a 401(k) to secure a successful retirement plan.

Jean Chatzky, a prominent financial expert, emphasises the importance of avoiding key missteps when managing retirement funds, particularly within a 401(k) plan. Many individuals, unfortunately, overlook simple yet impactful strategies that could significantly improve their financial readiness during retirement. The 401(k), an essential vehicle for long-term saving, is often misused by those who fail to maximise its potential.

One widespread error is contributing too little to the account, which leaves employees missing out on critical growth over time. When employers offer matching contributions, it is crucial to contribute enough to qualify for the full match—otherwise, individuals effectively forfeit free money. Additionally, poor investment choices within a 401(k) can hinder performance. Allocating assets correctly, based on one's risk tolerance and time horizon, can dramatically affect savings accumulation. Lacking diversification, typically putting all funds in a singular investment, sets many savers up for challenges if that asset underperforms.

Another common mistake involves prematurely borrowing from or withdrawing funds from the account. While many plans offer loans or early withdrawal options, doing so often incurs penalties and disrupts the benefits of compounding interest. This ultimately reduces the total amount available during retirement—a move many regret later in life.

Furthermore, neglecting periodic evaluations of account performance is a critical misstep. Life circumstances change, and adapting your retirement strategy to match evolving goals and market conditions is key to maximising your money. Regularly reviewing investment allocations and contribution amounts ensures that the plan stays on track to meet long-term objectives.

Chatzky also highlights the psychological factors that come into play with retirement savings. Many individuals procrastinate or avoid focusing on their retirement savings because of the overwhelming nature of financial planning. However, she advises starting small, making incremental changes, and seeking advice from financial professionals if guidance is needed. Chatzky underscores that taking ownership and staying proactive about retirement funds serves as an investment in one's future security and peace of mind.

In conclusion, Jean Chatzky stresses the importance of avoiding these common errors in managing a 401(k). Contributing consistently, leveraging employer matches, diversifying investments, and maintaining focus on the plan all ensure that savers can build a secure financial foundation for retirement. With thoughtful planning and regular adjustments, the mistakes that jeopardise one’s financial future can largely be avoided.