8 Factors that Determine Your Final 401(k) Balance

Savings and investment choices aren’t the only things that influence the size of your next egg.


Fees. 401(k) fees and expenses cut into investment returns. "If you're paying an extra 1 or 2 percent in fees in addition to investment costs, that's going to play a huge role in your overall investments over time," says Garcia. In extreme cases, fund expenses can even cancel out your growth. "If there are 3 percent fees, you could actually be going backwards," says Sarenski. "The higher the fees, the less growth you are going to have on your 401(k) plan money."

[See 6 Ways Employers Will Change 401(k)'s in 2010.]

Early withdrawals. 401(k) withdrawals before age 55 come with a 10 percent penalty in addition to income tax on the amount withdrawn. These early withdrawals can have a devastating effect on your final retirement account balance. For example, consider a 401(k) account holder born in 1970 who consistently saves 6 percent of pay annually from age 21 to age 65 and who gets a 3 percent employer match. If that person cashes out his or her balance once at age 35, it will result in $183,618 less in retirement than someone who didn't take any early withdrawals, according to Government Accountability Office calculations. To maintain the tax-deferred benefits of an old 401(k) account, leave it with an old employer, roll the balance over into an IRA, or transfer your savings to a new employer's 401(k).