Your 401(k) match is free money, and your contributions actually have to be invested.

I am not a financial advisor, and none of this is personalized advice. But I have watched too many people treat their 401(k) like a black box they are afraid to open, and it costs them more than they realize. Two mistakes show up again and again. The good news is both take about ten minutes to fix.

Mistake one: leaving the match on the table

An employer match is the closest thing to free money you will ever be offered. A common setup is something like "100 percent of the first 4 percent," or "50 percent of the first 6 percent." Translated: if you put in enough, your employer drops extra money into your account for doing nothing more than contributing. That is an instant return on your money, often 50 to 100 percent, before the market does anything at all. No investment reliably beats that.

So the floor for almost everyone is simple: contribute at least enough to capture the full match. If your plan matches up to 6 percent and you only put in 3, you are turning down a raise your employer already offered you. If you genuinely cannot afford the full match right now, contribute what you can and raise it a percent each time you get a raise, until you are capturing all of it.

Check the vesting schedule

One catch worth knowing: the money you contribute is always yours, but the employer's matching money may vest over time, meaning you have to stay employed for a certain period to keep all of it. Some plans vest immediately, others over three to five years. It does not change the decision to grab the match, but it is worth knowing before you leave a job, and your HR or benefits team can tell you the exact schedule.

Mistake two: contributing but never investing it

This is the one that quietly hurts the most, and it is the reason I wanted to write this. Putting money into a 401(k) is not the same as investing it. Your contribution lands in the account as cash, and unless it is actually directed into investments, it can just sit there in a money market or stable-value option, barely growing, for years. People assume that because money is going in, it must be working. Sometimes it is not.

Many modern plans auto-enroll you into a default investment, usually a target-date fund, which is a reasonable hands-off choice. But not every plan does, and money you moved or rolled over yourself can easily end up parked in cash. So log into your plan and check one thing: what is my money actually invested in? If the answer is a money market fund or "cash," that is a flag. Pick an actual investment, a low-cost target-date fund matched to roughly when you will retire is a perfectly good one-step answer, or a broad index fund from the menu. While you are there, glance at the expense ratios and lean toward the cheaper options, because fees compound against you over decades.

401(k) vs Roth IRA: what is the difference?

These get lumped together, but they are different tools, and a lot of people use both. The quick version:

The 401(k) is your workplace plan. It has a high contribution limit, 24,500 dollars for 2026, it is the only one of the two that comes with an employer match, and there is no income limit to participate. The trade-off is a limited menu of funds chosen by your employer. A traditional 401(k) is funded with pre-tax money, lowering your taxable income now and getting taxed when you withdraw in retirement. Many plans also offer a Roth 401(k), which flips that.

The Roth IRA is an account you open yourself at a broker. The limit is lower, 7,500 dollars for 2026, or 8,600 dollars if you are 50 or older, and there is no match. What it offers instead is flexibility and tax-free growth: you contribute after-tax money, and qualified withdrawals in retirement come out completely tax-free. You also get the whole market to invest in rather than a short menu, you can withdraw your contributions if you truly need to, and there are no required withdrawals during your lifetime. The catch is an income limit. For 2026 the ability to contribute phases out between 153,000 and 168,000 dollars of income for single filers, and between 242,000 and 252,000 dollars for married couples filing jointly.

A popular order of operations ties it all together: contribute to your 401(k) up to the full match first, then fund a Roth IRA if you are eligible, then come back and put more into the 401(k) if you can. You capture the free money, then the tax-free growth, then the higher limit.

The ten-minute version

Log into your 401(k). Make sure your contribution percentage is at least enough to get the full match. Check what your balance is actually invested in, and if it is sitting in cash, move it into a target-date or low-cost index fund. Ask HR for your match formula and vesting schedule if you are not sure. Then, if you have room, open a Roth IRA and set up an automatic monthly contribution. That is most of the game.

This is general education, not financial or tax advice, and the right mix depends on your income, your plan, and your goals, so confirm details with your plan administrator or a fee-only fiduciary advisor. If you are newer to all of this, my plain beginner's guide to investing covers the foundation, and which account to hold what in goes a layer deeper. The 2026 limits here were verified on June 25, 2026.