There are several mistakes people make regarding a 401k plan, but these seem to be the five worst.

1. Opting Out: If your company offers a 401k plan, you may or may not be required to participate. If there is no participation requirement, your biggest mistake is not taking advantage of this benefit. Participating in a company sponsored 401k plan is the easiest way to save for retirement.
2. Not Contributing Enough to Meet the Employer Match: If your company offers matching funds, the next biggest mistake you can make is not contributing enough to take advantage of these matching funds. Matching funds are basically free money.
3. Forgetting About Your Plan: Not reviewing your plan regularly is another mistake most people make with their 401k plans. Even though you would think you could set it and forget it, that’s not the case. By actively reviewing your plan an a regular basis, you can maximize your investments and make the most of your plan.
4. Stocking Up on Company Stock: Most 401k plans have a variety of investment options so investing too heavily in your company stock is a mistake. Poor asset allocation can result in not making the most of your investment dollars. One thing to remember though, some companies only offer their company stock in their retirement plans.
5. Cashing Out: Finally, maybe the worst mistake people make is using their plan as a source of funds. Money withdrawn before retirement will be subject to taxes and a hefty 10% early withdrawal penalty. Plus, it won't be there to continue growing into your retirement. Additionally, unless you need funds immediately and there is no other alternative, you should never take a loan from your 401k plan.

While there could be a good reason for making any of the above mistakes, you should try to avoid them if at all possible.

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