401(k) plans are a fabulous way to build your retirement savings. If your employer offers a 401(k) plan we urge you to take full advantage. If you are lucky enough to have an employer who will contribute matching funds, contribute at least enough to take full advantage of that free money!

As much as we like 401(k) plans, they aren't perfect.  Here are three costly 401(k) mistakes that can eat into your retirement:

Trap #1:  Excessive Fees

Fees for record-keeping, managing the investments, and other plan services can take a big chunk out of oyur 401(k) plan if you're not careful.

Here's a chart from Hewitt Associates showing how even a small increase in fees will eat into your retirement savings over time. Take a look at the chart below, which assumes a starting balance of $50,000 and an annual return of 8%:

Balance after

Talk about a fee "wake-up" call! The difference is much less noticeable in the first few years, but you can see the impact over a longer period time. Talk to your company representative and make sure you’re aware of the fees your 401(k) plan charges and any options you have to reduce those fees. It’s an area most people overlook that can make a big difference! For more info, try 401helpcenter.com.

Trap #2: Loading Up On Your Company's Stock

We can't emphasize this point enough: Put no more than 5% of your 401(k) money in your company’s stock, even if the company matches only that contribution.

We know that it's emotionally difficult not to put a big slug of your retirement bucks in a company that you know so well because you work there. But chances are you don’t run the company and you probably aren’t intimate with all the day-to-day details. Your fortunes are already tied to the company for your paycheck, so at least diversify for your retirement investments.

You may have heard the CEO’s pronouncements that it’s growing by double digit percentage points every year. Well, if you’re tempted to believe this, we have one word for you:

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