The days of companies taking care of their employees’ retirement by funding a pension plan is largely out of sight in the rearview mirror. Today, planning for retirement rests squarely on your own shoulders. Avoid these four mistakes so you’re not sabotaging your financial future.

Missing out on free money

Many employers, as an added employee benefit, offer to match employee contributions to a 401(k) plan. The amount contributed varies by company, but usually is a dollar for dollar or 50 cents on the dollar match up to a certain percentage. For example, your match might be 100% on the first 3% of salary contributed and another 50% on the next 2% of salary contributed. If you’re not contributing 5% to your 401(k), you’re leaving money on the table.

Not understanding plan features

Every 401(k) has a document that summarizes the plan’s features. Take a few minutes to read through yours. For example, these plans have traditionally allowed employees to make contributions that are pre-tax and hence lower the income you report on your tax return. However, some plans now allow for Roth contributions. You don’t receive a tax deferral today, but withdrawals are potentially tax free in the future.

Also, make sure your money is working for you. Plan sponsors generally have a qualified default investment alternative. If you don’t select how you’d like your money invested, the plan will default to this investment. Make sure it isn’t a money market account where you’re earning very little over time or a target date fund that may be more conservative than you need.

Treating your 401(k) like a bank

Your 401(k) dollars are meant to fund your future retirement. Don’t fall into the trap of looking at it as a place where you can borrow money. You lose the value of compounding if you do, among other potential negative effects.

Moving out of 401(k) prematurely

Any funds withdrawn from a 401(k) plan prior to age 59½ are subject to a 10% early withdrawal penalty. If you leave your employer between the ages of 55 and 59½, there is a special rule whereby the 10% penalty does not apply. So, don’t be too quick to roll your 401(k) balance over to an IRA during this period. The IRA does not have this exception and if you need to pull money for some reason, you just cost yourself 10%.

Securities offered through Royal Alliance Associates, Inc., member FINRA/SIPC. Investment advisory services offered through NCA Financial Planners. RAA and NCA are not affiliated. Mayfield Heights, OH, 440-473-1115,

Karey Edwards is a senior financial adviser with NCA Financial Planners.

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