3 reasons why your 401(k) may not be growing as fast as you'd hoped

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You’ve probably heard that planning to rely on Social Security alone is a bad idea. That’s because those benefits will generally only replace about 40% of your pre-retirement paycheck, and most seniors need roughly twice that level of income to maintain a decent standard of living.

To avoid a financial crunch in retirement, it’s important that you establish your own nest egg. And if you have access to a 401(k) plan through your employer, you may already be taking advantage of it.

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But what if, despite steady contributions, your savings balance isn’t growing as quickly as you’d like it to? If that’s the scenario you’re in, here are some possible explanations.

1. You’re not claiming your full employer match

Many companies that sponsor 401(k)s also match worker contributions to some degree. But if you’re not putting in enough money to claim your match (or your full match), you’re not only losing out on free cash, but also, potentially setting yourself up for disappointment.

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Even if you can’t come close to maxing out your 401(k) for the year, try pushing yourself to contribute enough to snag your complete employer match. Not only will that extra money help your balance grow, but you’ll also then get the chance to invest your matching dollars to boost your balance even more.

► Thinking of quitting your job? Here’s what to do with your 401(k)

2. You’re investing too conservatively

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If you’re the risk-averse type, you may be inclined to steer clear of stocks in your 401(k) and focus more on bonds. That’s a reasonable strategy if you’re within a few years of retirement. But if that milestone is several decades away, then it pays to push yourself out of your comfort zone and load up on stocks instead.

Stocks typically deliver much stronger returns than bonds. And so if you want to see your 401(k) balance grow, they should be a part of your investing strategy.

Now one thing you should know is that unlike IRAs, 401(k)s generally don’t let you choose individual stocks for your portfolio. Rather, you’ll have to stick to different funds where you actually don’t get a say in the stocks you own. But to some degree, that’s not necessarily a bad thing, because if you’re not comfortable hand-picking stocks, it can really take the pressure off.

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3. You’re losing money to fees

The specific funds you choose for your 401(k) will determine what fees you end up paying. And if you go heavy on actively managed mutual funds, you could end up losing so much money to fees that it impacts your savings’ growth.

If you feel you’re not making good enough progress in your 401(k), review your investments and make sure they aren’t too fee-heavy. If they are, consider moving over to index funds, which are passively managed and charge a lot less because they don’t have to pass the cost of employing fund managers on to you.

► Do you know how much you’re paying in 401(k) fees? What you need to know

Don’t settle for lackluster growth

Your 401(k) may be the one thing that really helps you manage your retirement expenses. If you’re dissatisfied with its growth rate, take steps to assess and address the above issues to get yourself back on track.

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The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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