Most Americans with a 401(k) assume their advisor is working in their best interest. Some of them will retire with $200,000 less than they should have because of one fee they were never told about. Don’t touch a single investment until you’ve read this list.
19. Your Advisor May Not Be a Fiduciary
There are two types of financial advisors: fiduciaries, who are legally required to act in your best interest, and brokers, who only need to recommend “suitable” products. Most advisors are brokers, not fiduciaries. That distinction sounds small. It isn’t. A broker can legally steer you into a higher-fee fund that benefits them financially, even when a cheaper option exists. Always ask in writing: “Are you a fiduciary?”
18. The Target-Date Fund in Your Default Plan May Be Costing You
If you never actively chose your 401(k) investments, you were probably auto-enrolled into a target-date fund. Many of these are solid. But some of them carry expense ratios above 0.70%, and a few employer plans use proprietary funds that charge even more. Over 30 years, that extra 0.50% in fees quietly erases tens of thousands of dollars from your balance. Check your expense ratio today.
17. You Can Roll Over Mid-Career Without Leaving Your Job
Many 401(k) plans allow an “in-service distribution” or “in-service rollover” after age 59.5. This lets you move part of your existing 401(k) balance into an IRA while you’re still employed. Most advisors won’t mention this because it reduces the assets they manage inside your employer plan. If your plan’s investment options are expensive or limited, this is worth exploring.
16. Contribution Limits Are Higher Than Most People Use
In 2026, the standard 401(k) contribution limit is $23,500. If you’re 50 or older, you can add a catch-up contribution of $7,500 on top of that, for a total of $31,000. Workers aged 60 to 63 can contribute even more under SECURE 2.0. The catch: your advisor only makes money when you invest, not when they tell you about contribution limits. Most don’t bring it up unprompted.
15. Your Employer Match Vests on a Schedule, Not Immediately
Many workers assume the employer match is theirs the moment it hits their account. It isn’t. Most employer matches vest over 2 to 6 years. Leave your job before you’re fully vested and you walk away with nothing from the match. If you’re thinking about switching jobs, check your vesting schedule first. Leaving 6 months early could cost you $10,000 or more in unvested contributions.
Read More: 14 Social Security Mistakes Americans Make Before Age 62
14. 401(k) Loans Look Safe. They Usually Aren’t.
Taking a loan from your 401(k) feels like borrowing from yourself. The reality is more damaging. While the money is out, it isn’t growing. If you leave or lose your job, the entire balance may be due within 60 days, and any unpaid amount is treated as a taxable distribution with penalties. One retired nurse told me she borrowed $15,000 for a home repair and ended up owing $6,000 in taxes and penalties after a layoff. The math rarely works in your favor.
13. Fees Are Often Hidden in Plain Sight
Your 401(k) has at least three layers of fees: plan administration fees, fund expense ratios, and sometimes individual service fees. The total can easily reach 1.5% per year in a poor employer plan. The Department of Labor requires these to be disclosed, but they’re buried in documents most people never read. A difference of 1% in annual fees compounds to a 28% smaller retirement balance over 30 years.
12. You Can Negotiate Better Investment Options
Many employees don’t realize they can actually push back. HR departments and plan administrators can swap out expensive funds for cheaper index fund options if enough employees request it. Several large employers have been successfully sued for offering only high-fee funds when cheaper alternatives existed. You have legal standing to ask. Most people never do.
11. The Roth 401(k) Option Is Often Better for People Over 50
If your employer offers a Roth 401(k) option, your advisor should be discussing it with you. With a Roth 401(k), you pay taxes now and withdraw tax-free in retirement. For many people who expect to be in the same or higher tax bracket in retirement, this is the smarter long-term move. Yet most employees are defaulted into traditional pre-tax contributions and never told there’s an alternative sitting right inside their plan.
10. Social Security Timing Affects How Much You Should Draw from Your 401(k)
The interplay between your 401(k) withdrawals and Social Security claiming age is one of the most important decisions in retirement planning, and one of the most poorly explained. Drawing heavily from your 401(k) in your early 60s while delaying Social Security can dramatically increase your lifetime income. Doing it in reverse can push you into higher tax brackets permanently. Most advisors oversimplify this or skip it entirely.
Read More: 17 Retirement Income Strategies That Beat the Standard 4% Rule
9. Your 401(k) Is Not Protected From All Creditors
Federal law protects 401(k) accounts from most creditors in bankruptcy. But that protection has limits. The IRS can garnish your 401(k) for unpaid taxes. Divorce proceedings can result in a Qualified Domestic Relations Order that splits your 401(k) between you and a former spouse. State-level lawsuits have more limited protections depending on the state. Your advisor should flag these risks; most don’t unless you’re already in trouble.
8. The Required Minimum Distribution Rules Changed and Many Advisors Got It Wrong
SECURE 2.0 pushed the RMD starting age to 73 in 2023, and 75 by 2033. Many advisors who trained under the old rules still operate on outdated assumptions. If you were given advice about when to start taking distributions before 2023, it may need to be revisited. Getting RMD timing wrong can trigger a 25% excise tax on amounts you should have withdrawn. That’s not a typo.
7. Your 401(k) Probably Has a Better-Performing Self-Directed Brokerage Option
Many 401(k) plans include a self-directed brokerage window (SDBA) that lets you invest in a much wider range of funds, including low-cost index ETFs not available in the standard menu. Most advisors never mention this because the standard investment menu is simpler to manage and the SDBA requires more active involvement. The standard menu usually has 20-30 options. The SDBA can give you access to thousands.
6. Automatic Escalation Can Work Against You in a Bad Market
Many plans include automatic contribution escalation, which increases your contribution rate by 1% per year. This is usually a good feature, but it comes with a catch most people don’t notice: your contribution rate keeps climbing whether you’ve gotten a raise or not. In a year where your income dipped or your budget tightened, you may be contributing more than you can afford and taking on debt without realizing the connection. Review your escalation settings annually.
5. Consolidating Old 401(k) Accounts Can Unlock Significantly Better Funds
The average American changes jobs 12 times over a career. That often means 12 different 401(k) accounts sitting at 12 different plan administrators, each with their own fees, investment restrictions, and paperwork requirements. Rolling them all into a single IRA not only simplifies your life but often gives you access to much lower-cost index funds. Forgotten accounts earn compound interest for the plan provider, not for you. One financial planner told me she once found a client had $87,000 sitting in a plan from a job they’d held for two years in 1998.
4. The “Safe” Stable Value Fund in Your Plan May Not Beat Inflation
Stable value funds are a staple of 401(k) plans and are often described as “safe” or “capital-preserving.” They are safer than stock funds in terms of volatility. But in a high-inflation environment, a stable value fund returning 2-3% is actually shrinking your purchasing power. Many participants shift heavily into stable value as they approach retirement and unknowingly lock in a guaranteed loss relative to inflation. Your advisor should be having this conversation with you every year. Most only bring it up when the market crashes.
3. The Backdoor Roth Strategy Works Even If You Earn Too Much
High earners are often told they can’t contribute to a Roth IRA because they exceed the income limits. What most advisors don’t volunteer is the backdoor Roth IRA strategy: contribute to a traditional IRA (no income limit), then immediately convert it to a Roth. Congress has repeatedly left this loophole open, and it’s entirely legal. For a couple doing this over 10 years, the tax-free compounding can add $200,000 or more to retirement assets that your advisor never even mentioned.
One CPA I spoke with in Phoenix said she sees clients in their late 50s every year who were never told about this. “They’ve been paying full income tax on investment gains for a decade when they didn’t have to,” she said. “The advisor just didn’t bring it up.”
Bad — but nothing compared to what’s waiting at #1.
2. Fund Expense Ratios Vary Wildly, and the Difference Compounds to Six Figures
A Vanguard Total Market Index fund charges roughly 0.03% per year. Some actively managed funds inside employer 401(k) plans charge 1.0% to 1.5% per year for no reliably better performance. On a $300,000 portfolio, that difference in fees costs you roughly $4,500 per year. Over 20 years, factoring in compounding, you’re looking at a $150,000 to $200,000 gap between the low-fee version and the high-fee version of the same basic outcome. Your advisor’s job is not to tell you this. Ask which funds in your plan have the lowest expense ratio and compare.
Bad — but nothing compared to what’s waiting at #1.
1. Your Advisor Gets Paid More When You Choose Certain Funds
The Conflict of Interest Nobody Discloses Up Front
This is the one most financial advisors will never volunteer, and it’s the most important item on this list.
Many advisors receive 12b-1 fees, revenue sharing payments, and sales commissions tied directly to which funds they recommend. A fund with a 1.2% expense ratio may pay your advisor 0.25% per year just for keeping your money there. A 0.05% index fund pays them nothing. The incentive to recommend the expensive fund over the cheap one is baked into the system.
The disclosure is technically there. It’s buried in your investment advisory agreement, often in language designed to be unreadable. “The advisor may receive compensation from certain fund providers” sounds almost harmless. It isn’t.
One financial planner in Dallas told me: “I switched to fee-only after I realized I was recommending funds I’d never put my own money into. The commissions were too good to turn down. I’m not proud of that.”
The fix is simple but almost no one knows to ask for it: request a full conflict-of-interest disclosure in plain language from your advisor. Ask specifically which funds in your plan pay them a referral fee or 12b-1 distribution fee. If they can’t answer clearly, that is your answer.
Now you know why we saved this one for last.
Your 401(k) Should Be Working for You, Not Your Advisor
The good news is that none of these problems are unfixable. Most of them cost you nothing to address except an hour of your time and a willingness to ask uncomfortable questions. Forward this to anyone you know who’s been trusting their financial advisor without checking the fine print. They deserve to know this before retirement, not after.
