I started my first “real” job at 23 and didn’t contribute anything to my 401k for two years. Two full years. The company offered a 4% match and I just… didn’t sign up.
I had excuses. “I need the money now.” “Retirement is forever away.” “I’ll do it next quarter.” Classic stuff.
By my math, that two-year delay probably cost me somewhere between $80,000 and $100,000 in retirement savings. And that’s being conservative about projected returns.
So yeah. Learn from my mistakes.
Mistake #1: Not Getting the Full Match
This is the big one. If your employer offers a 401k match and you’re not contributing enough to get the full match, you are literally turning down free money. I cannot emphasize this enough.
My company matched 100% of contributions up to 4% of my salary. So if I was making $50,000 and contributing 4% ($2,000/year), they’d add another $2,000. That’s a 100% return on my investment before the market even does anything.
According to the IRS’s 401k contribution rules, the maximum you can contribute yourself in 2024 is $23,000 (plus extra if you’re over 50). But honestly? Just getting the full match is the most important first step.
If you’re not doing this, stop reading this post and go sign up. Seriously. Right now.
Mistake #2: Leaving Money in the Wrong Funds
When I finally did enroll, I had to pick where to invest my contributions. I had no idea what I was doing, so I picked a “target date fund” and forgot about it.
This was actually… fine? Target date funds are designed for people who don’t want to think about it, and they automatically adjust over time. So I got lucky here.
But a lot of people either:
Leave everything in a money market fund (basically earning nothing)
Pick random funds without understanding what they are
Choose overly conservative options when they’re young
If you have no idea what to pick, a target date fund matching when you expect to retire (like “Target 2055” if you plan to retire around 2055) is a perfectly reasonable default. Not sexy, but it works.
Mistake #3: Cashing Out When I Changed Jobs
Okay so when I left my first job after three years, I had about $18,000 in my 401k. Not a ton, but not nothing either. And I cashed it out.
I KNOW. I know. I’m cringing as I type this.
I needed the money (or thought I did) and I didn’t understand rolling it over. So I took the cash, paid income taxes on it, paid a 10% early withdrawal penalty, and ended up with maybe $12,000.
That $18,000, left alone and growing at 7% annually, would be worth over $70,000 by the time I’m 60. Instead I bought… I don’t even remember. Probably nothing important.
When you change jobs, you can:
Leave the money where it is (if your old employer allows it)
Roll it over to your new employer’s 401k
Roll it over to an IRA
Do one of those things. Do not cash it out. Please.
Mistake #4: Not Increasing Contributions Over Time
Once I finally got serious about retirement savings (around 28), I set my contribution to 6% and just left it there. For years.
Here’s the thing: you should increase your contribution percentage every time you get a raise. Even just by 1%. You won’t miss money you never saw, and it adds up hugely over time.
Some 401k plans have automatic increase features. Turn this on if you have it. Your future self will thank you.
If you’re still early in your career and thinking about the Roth vs traditional question, that’s worth considering too. But honestly, the most important thing is just to contribute something.
Where I Am Now
At 34, I’m finally contributing 15% of my salary to retirement between my 401k and a Roth IRA. I’m projected to have a decent retirement, but nowhere near what I’d have if I’d started at 23 like I should have.
Compound interest is either your best friend or your worst enemy depending on when you start. Every year you delay costs you exponentially more than the previous year.
If you’re in your 20s reading this, please don’t make my mistakes. Enroll in your 401k today. Get the full match. Pick a target date fund if you’re not sure. Set up automatic increases. And for the love of everything, don’t cash out when you change jobs.
I wish someone had grabbed younger me by the shoulders and yelled this at me. Consider this my attempt to do that for you.