Fool's School

Want to retire with more money? Avoid making the following mistakes with your 401(k) plan:

• Failing to contribute enough to receive a maximum employer match. That's free money, providing an immediate and risk-free, taxdeferred return on your savings.

• Borrowing from your 401(k) when you don't have to. Is a kitchen remodeling worth jeopardizing your future for?

• Trying to time the market. Don't jump from one investment to another, chasing "hot" sectors. Even pros can't consistently time the market successfully.

• Being too conservative. If you have 10 or more years until retirement, don't avoid stocks. Over long periods, they've outperformed bonds and other alternatives.

• Being too aggressive. Consider keeping money you'll need within five or so years out of stocks.

• Holding too much of your employer's stock. Try to have no more than 10 percent to 20 percent of your plan assets in any one com- pany. Even respected companies can implode, with disastrous results for employees.

• Failing to allocate or rebalance. Decide what percentage of your money you want in stocks, bonds and cashlike investments, according to your age, risk temperament and goals. Then monitor and rebalance your holdings every year or so.

• Keeping a default election that automatically invests your money in an ultraconservative option. This can doom you to low returns.

• Cashing out after a job change. Too many people do this each time they switch jobs, leaving themselves with little to retire on. Leave your money in the plan, or roll the balance into your new employer's plan or an IRA.

• Ignoring index funds. Your best bet for stock investments in a 401(k) is usually an index fund, such as one based on the S&P 500 or the total stock market. If your plan doesn't offer one, ask about it.

Above all, don't fail to participate in your plan in the first place! Learn more about 401(k)s at www.fool.com/money/401k and www.401khelpcenter.com/Employeeindex. html.