Retirement Retirement Planning

This One 401(k) Move Most People Never Make Could Cost Them Over $100,000

Most employees can't afford to make this mistake.

By Catherine Collins , Edited by Laura Hohenstein

Updated April 9, 2026

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Most people set up their 401(k) retirement plans and forget about them. Other than seeing their 401(k) contributions taken out of their paychecks each month, most employees adopt a set-it-and-forget-it approach to retirement. However, failing to make one significant update to 401(k)s can cost people over $100,000 or more in lost retirement income.

This missed opportunity is failing to increase 401(k) contributions each year. Many employers offer a 401(k) auto-escalation feature, but others don't. That means it's the employee's responsibility to manage retirement account investments and increases.

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The 6-figure mistake: failing to increase 401(k) contributions every year

One of the leading retirement plan brokerage firms, Fidelity, explains that increasing contributions limits by just 1% each year could lead to $100,000 or more in extra retirement funds that people can use for basic expenses, fun vacations with family, or anything else they need. Fidelity found that a 35-year-old employee earning $60,000 per year could have nearly $110,000 more by retirement with only a 1% increase in contributions.

The younger employees start increasing contributions, the more impact those contributions will have in increased retirement funds.

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What is auto-escalation and how it works in 401(k)s

If your employer offers auto-escalation, it can be a good tool for gradually and automatically increasing contributions each year. With this benefit, you can set your contributions to automatically rise each year. If you get a raise or a bonus, you can also increase your contributions. Many auto-escalation plans allow you to start with a 3% to 6% contribution rate, with annual increases up to a cap, typically 10% to 15%. Every employer is different, so if you're not sure if yours offers this option, check with your human resources department.

Why many workers don't use this feature

Many workers don't use the auto-escalation feature because they may not be aware it's available to them. Additionally, some opt out of it to focus on maximizing their take-home pay. With rising costs across many aspects of everyday life, some employees might feel unable to increase their contributions while still maintaining their lifestyle. That said, it's worthwhile to run the numbers to see how much raising contributions by 1% would cost each month. It might be far less than employees realize.

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Other hidden money leaks in 401(k)s

If employees want to find other ways to maximize their 401(k)s, paying attention to fees is also important. Many 401(k) plans charge transaction, service, record-keeping, and expense-ratio fees. The average management fee can be 1%. That means that employees may be paying thousands of dollars in fees without realizing it. Many times, fees are buried within 401k paperwork.

Employees can also pay attention to their investment choices. There are several different types of assets to choose from within 401(k) accounts. Some, like index funds, may have much lower expense ratios than other products. Finally, not getting the full employer match is another money leak that many people don't realize. Understanding your employer's matching policy and making sure that you're contributing at least enough to get the match ensures you get free money from your employer every year.

Economic factors that impact employees' annual contribution increases

There are other economic factors that may impact employees' ability to increase their contributions each year. As mentioned, household expenses are rising. There's been an increase in the cost of groceries, gas, rent, and many other common household bills. As a result, research found that nearly half of American families can't afford the cost of living right now.

Employees who struggle to make ends meet may not feel that they can allocate extra money to increasing contributions each year. Monitoring expenses, sticking to a budget, and forgoing large expenses, like home renovations or expensive vacations, can help employees balance affording their everyday expenses with their long-term goals.

Other ways to boost retirement savings

As mentioned, employees can take advantage of their employer's match and increase contributions after receiving a raise or a bonus. Another option is to switch jobs as a way to increase income or to ask an employer what steps to take to earn a promotion within the next year. Double-checking your asset allocation and ensuring that your portfolio matches your risk tolerance and age can also help ensure you're on the right track to retire on time.

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How to review your 401(k) plan details

To review your 401(k) plan details, read through your retirement plan documents that you got from your employer. These documents should list details about your contribution limit, whether or not your employer offers auto escalation, your employer's match plan, and details about the fees you're paying for your plan. By reviewing your plan, you can avoid the set-it-and-forget-it mentality and instead take an active approach to making sure you reach your long-term retirement goals.

Bottom line

One of the biggest mistakes that employees make is failing to increase their contribution limits each year. Even a 1% increase in contributions annually can lead to six figures or more in future retirement income. Many people have the goal of enjoying a stress-free retirement one day. Increasing your 401(k) contribution limits is one step toward getting there. Additionally, monitoring your spending, reviewing your 401(k) plan details, and taking advantage of other benefits, such as an employer match, can all help you reach your retirement goals.

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