Retirement Retirement Planning

7 Costly 401(k) Mistakes People Make in Their 40s (And the Price They Pay)

Make sure you're not making the same mistakes.

By Catherine Collins , Edited by Laura Hohenstein

Updated April 30, 2026

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Being in your 40s can be a highlight for many American workers. At that point, you're typically established in your career, confident at work, and entering your highest earning years.

However, many people in their 40s regret making mistakes with their 401(k) retirement plans. Here are some of the most common ones so you can make the right moves.

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Not increasing contributions when income rises

Only 14% of workers maxed out their 401(k) accounts in 2024, according to data from Vanguard. This shows that many employees may not be increasing their contributions over time.

Although some employers offer automatic escalation, where they increase contribution limits annually, others don't. Generally, a good time to increase contributions is when you get an annual raise or a bonus. That way, you haven't gotten used to a bigger paycheck, and the extra funds can go towards retirement investing.

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Cashing out or taking loans from the account

Many people in their 40s regret taking out a 401(k) loan because it has a few drawbacks.

First, if you don't pay back your loan, it counts as an early withdrawal, which comes with penalties and potential tax consequences.

Secondly, the money you withdraw from your retirement accounts is money that isn't working for you in the market. The Transamerica Institute reports that 31% of people have taken out a 401(k) loan.

Being too conservative with allocations too early

Many financial experts recommend adjusting investment allocations to be more conservative as you near retirement.

However, many people in their 40s regret being too conservative too early. After all, workers in their 40s may have 25+ years left of working, which is a long investment time horizon.

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Ignoring fees that quietly erode returns

It's easy to set up a 401(k) and forget about it, but many workers in their 40s regret doing that because it's easy to overlook plan fees.

Within your 401(k), you pay a variety of hidden fees that include administrative fees, managed account fees, recordkeeping fees, transaction fees, expense ratios, and more. All of these fees can significantly impact your overall investment returns over time, so it's important to review them annually.

Failing to roll over old 401(k) accounts

When some employees switch jobs, many of them fail to roll over old 401(k) accounts. Sometimes they lose track of accounts, and sometimes they cash them out early.

Vanguard found if employees drop their 401(k) contributions by 1% when they switch jobs, it could equate to $300,000 less in retirement funds when they stop working. That's why it's so important to understand your 401(k) options when changing employers.

Not taking full advantage of employer matching

Another mistake people in their 40s regret is not taking full advantage of their employer's 401(k) matching program.

Every employer has a different matching policy. Some don't offer matching funds at all, while others match up to 10%.

An employer match is essentially free money that you get simply because you contributed to your retirement account. Not understanding your policy and not contributing enough money to get the match means you could be leaving money on the table.

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Not saving enough

According to the Protected Retirement survey, 28% of workers who are over age 45 believe they won't be able to retire on time because they didn't invest enough. If you feel this way, there is still time to get on track with your retirement savings, but it will take a focused approach and consistent investment over time.

Remember, even a 1% increase in retirement contributions can contribute to thousands of dollars in returns by the time you retire.

Where to get 401(k) help

If you're not sure whether or not you're on track to meet your retirement goals, schedule a time to meet with a financial planner. A licensed financial advisor can help you look at your personal finances and learn about your goals. They'll take that information and help you create a strategy to retire on time with the lifestyle you want.

If you have general questions about your 401(k) plan, fees, or other account information, consult your human resources department at work.

Bottom line

When you're in your 40s, there's still time to invest enough to enjoy a stress-free retirement. However, making mistakes, like not investing enough or not taking advantage of an employer match, can cut into potential retirement returns.

That's why your 40s are a good time to review your 401(k) investments, learn about fees, and review your employer's matching policies. That way, you can make sure you're maximizing your 401(k) plan benefits and setting yourself up for a good lifestyle during your golden years.

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