How to Avoid 401(k) Mistakes in Your 50s
By your 50s, retirement planning moves from the “it’s a long way off” phase to “it’s time to get serious.” You likely have a better sense of your lifestyle needs, retirement timeline, and how much you've saved, or haven’t. But with only 10 to 15 years left before most people retire, your margin for error is slimmer.
This decade is when your earnings typically peak, and for many, the kids are out of the house, which can free up more cash for saving. The IRS also gives you a powerful method to ramp up your retirement savings through 401(k) catch-up contributions, making your 50s a strategic window for action.
In this article, we’ll look at some of the common 401(k) mistakes people make in their 50s and how to avoid them. Keep reading to learn everything you need to know about 401(k) catch-up contributions.
Common 401(k) Mistakes in Your 50s
Even experienced savers can make some potentially costly missteps when managing their 401(k) in midlife. Here are three of the biggest we often see:
Not Maximizing Contributions
Too many workers fail to take full advantage of their contribution limits. For 2025, people over 50 can contribute $31,000 to their 401(k), thanks to the $7,500 catch-up contribution on top of the standard $23,500 limit.
If you're not hitting that maximum, or at least getting close, you could be leaving valuable tax-advantaged savings on the table. Even small increases in your monthly contribution can grow and compound over the next decade due to compounding.
Withdrawing Funds Early for Non-Retirement Needs
In your 50s, life expenses can pile up: college tuition for kids, caring for aging parents, or paying down debt. It may be tempting to dip into your 401(k), especially if you see a sizable balance. But early withdrawals come with serious consequences, including income taxes and a 10% penalty if taken before age 59½, unless you qualify for an exception.
Even beyond the immediate penalties, the larger cost is the loss of compound growth. Every dollar you withdraw today could have possibly doubled or even tripled by the time you retire.
Instead of tapping into your 401(k), consider building a separate emergency fund or exploring other financing options that won’t negatively affect your retirement
Ignoring Plan Fees
Fees can quietly erode your retirement savings. If you're paying high expense ratios on mutual funds or administrative fees through your 401(k) provider, you could be losing hundreds or even thousands over time. Excessive fees are one of the top overlooked pitfalls in retirement planning.
Compare your plan’s fees to industry averages, and don’t hesitate to ask your HR department for details. Sometimes rolling over old 401(k)s into lower-cost IRAs can be a smart move, especially if you’ve changed jobs several times and are juggling multiple accounts.
Poor Asset Allocation
Your 401(k) shouldn't be set-it-and-forget-it. Yet many people in their 50s still carry overly aggressive or conservative portfolios that don’t align with their time horizon or risk tolerance.
For example, staying too heavy in stocks could expose you to potentially big losses close to retirement. On the flip side, going too conservative may stunt your portfolio’s growth, making it harder to keep up with inflation.
Regularly revisiting your asset mix, and adjusting it as your goals and market conditions evolve, is key. This is especially true if you’ve had the same allocations for years without reviewing your risk profile.
Understanding 401(k) Catch-Up Contributions
One powerful advantage available to workers in their 50s is the 401(k) catch-up contribution. This provision allows individuals age 50 and older to contribute an extra $7,500 per year to their 401(k) plan in 2025, on top of the standard $23,500 limit.
These contributions are tax-deferred (or tax-free, if using a Roth 401(k)), and over 10 to 15 years, they could significantly boost your retirement readiness. For example, if you start contributing the full $30,500 annually at age 50 and continue until age 65, with a 7% average annual return, your 401(k) could grow to approximately $820,000 by retirement.
It’s important to confirm with your plan administrator that your 401(k) accepts catch-up contributions, and that you’ve enabled them in your payroll deductions.
Adjusting Risk as Retirement Approaches
Risk tolerance isn’t static; it should evolve as you age. In your 50s, it's crucial to consider if you should begin dialing down your exposure to high-volatility assets like small-cap stocks or concentrated sector investments.
That doesn’t mean abandoning growth opportunities entirely. You’ll still need your portfolio to grow enough to support a retirement that could last 25 to 30 years. But the emphasis should generally begin to shift toward preservation of capital, income generation, and lower volatility.
Consider gradually increasing your allocation to lower risk investments, which might include:
- Bonds or bond funds with strong credit quality
- Dividend-paying stocks
- Target-date funds are designed to adjust risk over time
You can also “bucket” your retirement savings into short-, medium-, and long-term segments. For example, money you’ll need in the first 3–5 years of retirement might go into more conservative investments, while money for your later years can remain in growth-oriented funds.
How a Financial Advisor Can Help
If you’ve spent most of your career managing your 401(k) on autopilot, your 50s are the right time to get experienced guidance. A competent financial advisor can help you:
- Optimize your contribution strategy
- Plan for required minimum distributions (RMDs) and tax implications
- Review asset allocations and rebalance accordingly
- Identify high-fee investments that may be underperforming.
- Coordinate your 401(k) with other retirement assets like IRAs, pensions, or brokerage accounts
An advisor can also help stress-test your retirement projections under different scenarios: market downturns, inflation spikes, or changes in your planned retirement age.
Choosing the right advisor matters. Look for someone who focuses on retirement planning for individuals in your stage of life.
Final Thoughts: Course-Correct Before It’s Too Late
In your 50s, your financial decisions carry greater weight, and less time for possible recovery. Failing to optimize your 401(k) contributions, keeping a misaligned asset allocation, or ignoring fees may not seem urgent now, but these financial mistakes can compound over time.
On the flip side, your 50s also offer unique advantages: higher earning power, eligibility for catch-up contributions, and the opportunity to get laser-focused on your retirement goals.
Start by reviewing your current 401(k) strategy, take steps to adjust where needed, and consider working with a professional to ensure you're on track. The retirement you’ve dreamed of is still within reach, if you make the most of these crucial years.
Ready to take control of your 401(k) and secure your retirement? Contact Pioneer Wealth Management today. Our seasoned financial advisors specialize in guiding individuals through smart, strategic 401(k) planning, especially during the crucial years leading up to retirement. Let us help you build a future you can count on!
Investment Advisory Services offered through CreativeOne Wealth, LLC, a registered investment adviser. CreativeOne Wealth and Pioneer Wealth Management are not affiliated companies. Licensed Insurance Professional. We do not provide tax or legal advice and are not affiliated with any government agency.
Investing involves risk, including possible loss of principal. No investment strategy can ensure a profit or guarantee against losses. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. This information is for educational purposes only and should not be construed as a recommendation or advice for your particular situation.
