3 Signs You Aren't Making the Most of Your 401(k)
- - 3 Signs You Aren't Making the Most of Your 401(k)
Maurie Backman, The Motley FoolFebruary 16, 2026 at 4:22 AM
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Key Points -
You shouldn't give up free money in your workplace retirement plan.
You shouldn't sell yourself short on investment returns.
You shouldn't assume that a traditional 401(k) is your best bet.
The $23,760 Social Security bonus most retirees completely overlook ›
The money to fund your retirement has to come from somewhere. And you shouldn't expect it to come from Social Security alone.
Those benefits might replace about 40% of your pre-retirement income if you earn an average paycheck. But most retirees need considerably more than 40% of their former pay to live comfortably. And it's important to save on your own to bridge that gap.
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If you have access to a 401(k) plan through your job, you have a prime opportunity to build retirement savings. But it's important to make the most of your workplace plan. And if these signs apply to you, you may not be doing that.
1. You're not getting your full workplace match
It's pretty common for companies that offer 401(k)s to also match worker contributions to some degree. But if you're not getting your workplace match in full, you're basically leaving free money on the table.
Keep in mind that matching policies can change from one year to the next. It may be that your company was willing to match up to $3,000 in employee contributions in 2025, but this year, it will match up to $5,000. Find out the rules so you don't end up saying no to extra money.
2. Your money is sitting in a target date fund
When you don't choose specific investments for your 401(k), it's common for your money to land in a target date fund. A target date fund will adjust your risk profile based on whether you are close to or far from retirement.
While target date funds are an easy way to save for retirement, they don't necessarily let you maximize returns. And if your money isn't growing efficiently, you could end up with a lot less savings at the end of your career.
A better bet? Explore your 401(k) plan's investment choices. Chances are, you'll find some low-cost index funds that may offer stronger returns than what a target date fund gives you.
3. You're choosing the wrong 401(k) type
Back when Roth 401(k)s were first introduced, not every company offered one. These days, Roth 401(k)s are more common. And it could pay to save in one for the long-term benefits.
While Roth 401(k)s don't give you a tax break on contributions, you get to enjoy tax-free investment gains and withdrawals in retirement. Plus, Roth 401(k)s give you more freedom with your savings later on by not imposing required minimum distributions.
Now, if you're in a very high tax bracket based on your earnings, a Roth 401(k) may not make sense. But if your tax bracket is fairly low, it could pay to fund a Roth 401(k) instead of a traditional one.
If you're participating in your company's 401(k) plan, you're doing your part to set yourself up for a secure retirement down the line. But it's important to try to maximize that effort and to make changes if your current 401(k) strategy has some holes.
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