10 Ways Your 401(k) Can Fail You

Don't be afraid to seek out professional help as you evaluate your plan and ensure that investment decisions are wise, in tune with your objectives and fall within your risk tolerance.

7. Manager instability

Not only do you want to make sure your investments are in competent hands; you want to be looking for stability.

Form 5500, the government-mandated annual report required of employee benefit plans, can help you keep tabs on when key people leave or, even worse, are fired (see line items in Section 25). Similarly, you should keep up to date on the management of the funds you invest in.

Change is inevitable, but instability could be bad news for your returns.

8. Government needs

The tax-deferred status of 401(k) plans is an inherent strength that, in theory, allows you to save more and give less away to the government down the road.

The problem, like any other tax strategy, is that the government can change the rules. Among the ideas floated to reduce government tax expenditures are capping pretax contributions and chipping away at retirement savings deductions.

9. Limited death benefits

The sad reality is that all your careful saving and investing won't eliminate the possibility you pass away before collecting on it. Unfortunately, 401(k)s are't the greatest vehicle for passing along those savings.

You can, of course, set a beneficiary -- your husband or wife, for example -- and even establish a backup plan in the form of contingent beneficiaries.

Unfortunately, unlike IRAs, there is no built-in "stretch" option that allows heirs to take only a required minimum distribution (based on their IRS life expectancy tables) and let the balance grow tax-deferred.

New laws, as well as plan policies, have sought to give your extended family some of the same advantages as a spouse. You still will want to make sure, however, a plan is in place to make sure your heirs don't see your decades of savings evaporate through federal, state and estate taxes.