How Your 401(k) Might Be Failing You (and how to fix it)
401(k) Pitfalls and How to Turn Your Plan Around
Your 401(k) is likely the engine of your retirement. Yet for many savers, it’s on autopilot—defaulting into target-date funds, missing employer matches, and drifting into cash or bond-heavy mixes at the worst times. In this Farm Truck Financial conversation, Eric Kearney and Joseph Lanza explain how to take control so your investments actually serve your lifestyle and income goals.
From Pensions to Personal Responsibility
Forty years ago, pensions did the heavy lifting. Today, the responsibility sits on your shoulders. That shift means you must decide how much to save, where to invest, when to rebalance, and how to turn savings into income later. The good news: a few smart moves compound into real results.
The Cost of Procrastination
Enrollment can feel like a hassle—sometimes a “17-click” hassle. But delaying setup or increases is costly. One viewer story: a lunch-break nudge to “fill out the paperwork” turned into consistent contributions and, over time, a seven-figure balance. Small actions, repeated, win.
Don’t Lose Track: Old 401(k)s and Rollovers
Job changes often leave a trail of neglected accounts. Consolidating old 401(k)s into a current plan or IRA can improve oversight, investment choice, and rebalancing. Know where every dollar lives and make each account work toward one plan.
Free Money: Capture the Employer Match
If your plan offers a match, contribute at least enough to get 100% of that benefit. Skipping the match is like walking past dollars on the sidewalk.
Invest First, Spend the Rest
Wealthy households share a habit: they invest first and live on what remains. Treat contributions as a monthly bill, just like utilities or insurance. Automate increases, especially after raises or bonus season.
Common 401(k) Pitfalls to Avoid
- Target-date autopilot: Convenient, but not customized to your risk, timeline, or other assets. Review the underlying mix—especially its bond exposure near retirement.
- Confusing deposits with performance: Your account can grow because you added money. Check true investment return when judging results.
- “I don’t know what I own” syndrome: At least quarterly, review your actual funds, fees, and allocation. Know your mix of stocks, bonds, and cash.
- Sitting in cash or stable value by accident: Some plans default contributions there. That may feel safe but can stunt long-term growth.
- Market-timing detours: Moving to bonds during volatility and forgetting to move back often locks in underperformance.
Roth 401(k): Tax Diversification You’ll Thank Yourself For
Many plans now offer a Roth 401(k) option. Paying taxes on contributions today can provide tax-free withdrawals later, useful when building multiple income “buckets” for retirement.
Your Monthly 401(k) Tune-Up Checklist
- Confirm contributions (and auto-increase) to capture the full match.
- Review allocation versus your risk, timeline, and outside assets.
- Rebalance to targets; avoid extreme swings toward cash or bonds.
- Catalog and consolidate old accounts; eliminate strays.
- Evaluate Roth 401(k) eligibility and potential tax benefits.
- Track investment return separately from contributions.
Make Your 401(k) Serve Your Lifestyle
Retirement isn’t about a balance number—it’s about sustainable income that supports how you want to live. Align contributions, allocation, and rollover decisions with a written plan that maps spending needs to reliable income sources.
Need a Second Opinion?
If you’re unsure how your 401(k) is invested, or how it fits your income plan, schedule a farm-fresh second opinion at MyIncomePlan.com. One conversation can change your trajectory.
