3 Mistakes All 401(k) Savers Should Avoid in 2026

The article advises 401(k) participants to avoid three costly errors: failing to claim the full employer match (example: leaving $1,000 of a $3,000 match unclaimed, which could grow to roughly $22,000 at an 8% annual return over 40 years), ignoring investment fees—particularly high-cost default target-date funds—and overlooking Roth options that provide tax-free growth, no required minimum distributions and, starting in 2026, require catch-up contributions to be Roth for earners above $145,000. Taken together these missteps can materially reduce retirement savings and increase future tax exposure; savers should optimize matching contributions, favor low-cost index options where available, and consider Roth allocations for tax diversification.

Analysis

The article highlights three concrete 401(k) mistakes retirees should avoid: failing to claim the full employer match, ignoring investment fees, and overlooking Roth options. It illustrates the first point with an example where an employer offers a $3,000 match but the employee contributes $2,000, thereby surrendering $1,000 that, at an 8% annual return, could grow to almost $22,000 over 40 years.

On fees, the piece warns that target-date funds—often the default for many 401(k) plans—can carry relatively high expense ratios that erode long-term returns, and it recommends checking for lower-cost index funds within the plan.

Regarding tax treatment, the article notes that Roth 401(k)s sacrifice the immediate tax deduction but provide tax-free growth and withdrawals and do not force required minimum distributions; it also calls out a 2026 rule that catch-up contributions for earners above $145,000 must be Roth while regular contributions may remain pre-tax. These points materially affect long-term retirement balances, tax exposure, and required distribution planning.

Key Decisions for Investors

• Increase 401(k) contributions as needed to capture the full employer match immediately, because unmatched dollars represent forfeited compounding worth tens of thousands over decades
• Audit your plan’s fund lineup and replace or avoid high-fee default target-date funds in favor of low-cost index or passive options available within the 401(k) to preserve long-term returns
• Shift a portion of contributions to a Roth 401(k) to lock in today’s tax rate, obtain tax-free withdrawals and avoid RMDs, and plan for the 2026 rule requiring catch-up contributions to be Roth if you earn above $145,000
• Monitor plan fee disclosures and employer match rules annually and consider supplementing poor 401(k) options with an IRA or taxable investments if necessary