Last week's column drew a comment from a 401(k) millionaire, having started his 401(k) participation right away -- "from day one."

He offered some advice to those who aren't convinced about the benefits of impactful participation: "Sacrifice if necessary but just do it. The future passes at warp speed, and before you know it, retirement ... is upon you." Thank you, J.H. This is good advice indeed.

With that advice in mind, let's look at mistakes that can keep you from achieving millionaire status, starting with the biggest mistake we touched on last week.

Most 401(k)s do provide matching contributions. If your plan is in the minority, use these data points from Plan Sponsor Council of America's 66th annual survey to ask for a change. The survey of 687 plans confirmed that only 20.6% of plans did NOT offer matching contributions. Instead, 13.8% offered non-matching contributions, and 6.8% offered no contributions of any type (tinyurl.com/yhucastw).

Not getting your full share of the company match is Mistake No. 1. Say your 401(k) is set up to match your contribution dollar for dollar up to 6% of compensation, but you are only contributing enough to trigger a 1% match. Explore your reasons. Sometimes, it's just something you haven't thought of checking on after you signed up for the 401(k). Get your contribution up to 6%.

Mistake No. 2: Cashing out of your 401(k) when you change jobs.

The U.S. Treasury would love for you to take every penny out of your 401(k) when you change jobs for one very good reason: more tax revenue. It's surprising but true that some 401(k) participants who cash out are not aware that withdrawals are taxed as income. Not only do you pay taxes on the withdrawal, but you may also pay a penalty for early withdrawals (before age 55 for a 401(k)).

What should you do instead of cashing out? Generally, you can leave the 401(k) with your old employer, move it to your new employer's plan (if transfers are permitted) or set up a rollover IRA working with your financial adviser. If you don't have an adviser, try your local bank or a national firm such as Vanguard or Fidelity. (I have no connection with either firm.)

Mistake No. 3: Borrowing from the 401(k) to make consumer purchases.

This is a biggie. Just about every 401(k) plan has a loan feature (82.9%, according to the Plan Sponsor Council of America survey).

While loan provisions may be a blessing in the case of emergencies, they should not be used for consumer purchases. "Should you borrow or take an early distribution from 401(k)?" an article by Merrill, discusses the considerations and risks involved (tinyurl.com/ytdm44dd).

Mistake No. 4: Defaulting on a loan.

If you do have to take out a loan, you need to know about timing, repayment and default.

Timing: According to an IRS resource (tinyurl.com/44z6wx7e), most loans have to be repaid within five years, unless the loan is used to buy a primary residence. Check your plan. What happens if you can't meet the timing?

Repayment: How do you repay the loan (usually payroll deductions), and what happens if you quit?

Default: Before you borrow, find out how a default is handled (for example, if you quit while a loan is outstanding). Usually, your 401(k) balance is used to pay the outstanding loan. When that happens, you will need to pay taxes on the withdrawal, along with a potential tax penalty.

Do your homework before taking out a loan, and include your tax adviser in the conversation.

These common mistakes highlight the importance of being informed. As part of my advocacy for financial literacy education, I created and fund the 401(k) Champion Competition. (Full disclosure: I am NOT in the 401(k) business.) This year's competition launched Sept. 9, and I encourage all 401(k) participants to apply now. Champions have the ability to help others learn about how 401(k)s work and contribute to retirement security. Visit 401kchampion.com.

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Can you become a millionaire just by saving for retirement through a 401(k)? The answer is a clear yes. Fidelity Investments, which handles 24 million 401(k) accounts, revealed in its latest quarterly report that there are almost a half a million (497,000) 401(k)-created millionaires in their system (tinyurl.com/38rnert7).

According to Fidelity, the 401(k) millionaires "were able to reach this level of retirement savings by starting early and contributing consistently over many years." That's clearly a formula for success.

Overall, average account balances for 401(k)s with Fidelity were at $127,100 during the second quarter, with total average 401(k) savings rates being 14.2% (employees contributing 9.4%, and employers contributing 4.8%). Even younger participants (Gen Z's born between 1997 and 2012) have been saving, with average balances of $12,000, a solid start for this demographic slice that includes brand-new workers (tinyurl.com/4xxh4x87).

So here's a question for you: From your current position today, can you see a pathway to contributing more to your 401(k)? Or to start contributing if you don't already?

Before saying "no," do one thing for me:

If you are currently participating, find out if you are maximizing the employer match (if there is one). Also find out about the vesting schedule (some matches take a few years to vest, meaning if you leave the company before vesting, you can't take the full match with you).

If you are not participating, but your available plan does offer a match, my advice is to ask for help. You are losing money that your employer wants to give you for your retirement.

For example, a common employer match caps out at 6% of your compensation. That means if you make $60,000, the most your employer will match is up to $3,600 (6% of $60,000).

If the match is dollar-for-dollar, you would receive $3,600 as a contribution from your employer. To qualify for the full $3,600, you have to do your share by participating in the plan and contributing $3,600 as a payroll deduction.

If you look at the dollar-for-dollar match, as I do, from an investment point of view, you'll see a return of 100% on your investment. It helps to think of a match as immediate compounding. Try to get those results in a savings account.

Or, if the match is 50 cents on the dollar, which is more common, the maximum employer match on the $60,000 example would be $1,800 (one-half of $3,600). You contribute $3,600 through your payroll deduction, and your employer puts $1,800 in your 401(k) account as a match. This match gives you a 50% return on your investment -- without the wait that the math of compounding requires.

Do me a favor, check out your 401(k) plan's match. And, write to me with questions (readers@juliejason.com).

Another point. When you contribute to your 401(k) as we have discussed, your W-2 will not include the contributions nor the matches as taxable income, and you will lower your overall W-2 earnings, which means there is a potential for lower income taxes overall.

If you get a refund at tax time, you need to check your withholding allowances. Consider eliminating that refund so you can afford to put more into your 401(k). You may be able to maintain the size of your take-home paycheck by adjusting your withholding allowances. You will want to talk with your tax adviser to work out the details.

One final point: It's September, which means that 401(k) education is on my mind. As regular readers know, I'm an advocate of financial literacy education. That's why six years ago, I created and fund the 401(k) Champion Competition. Full disclosure: I am NOT in the 401(k) business.

The 2024 competition launched on Sept. 9, following National 401(k) Day, and I encourage all 401(k) participants to apply now to tell their stories about their 401(k) experiences. There is no cost. Three winners each earn the title of 401(k) Champion and a check for $1,000. The deadline for applying is Oct. 10, but please don't delay. Go to 401kchampion.com for more details.

There's something special about September, agreed?

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If you are one of the many people who are averse to reading prospectuses, let me explain something: Prospectuses are like martial arts. They can teach you self-defense.

Having written prospectuses as a young Wall Street lawyer, I can share a few tricks on how to make it through the legalese.

First, don’t confuse a prospectus with literature. Forget about reading one from start to finish as you would an article or a story. Read it as you would a warning label on a bottle of prescription medicine, remembering that the prospectus is there to protect you. Read it for signs of danger -- that is, anything that you can misunderstand to your detriment.

What’s an example? If you are attracted to the product because of guarantees presented to you orally, you’ll want to confirm your understanding with language in the prospectus. You can ask your adviser to point out the relevant language.

Other examples: What about penalties for early withdrawal (contingent deferred sales charges)? Or something that can work to your advantage, such as a waiver of sales commissions for IRA accounts?

Second, remember that a commissioned adviser’s job is to sell. Your job is to be a skeptic. Read the prospectus to find reasons you may NOT want to buy the investment. Example: Costs are too high.

Third, scan a few prospectuses. You’ll see that they follow a formula. One section will explain the investment; another will discuss risks; others will set out how to buy, how to sell, charges and fees, taxes and so on. Some products come with prospectuses in multiple parts. Be sure to get them all if you are investing serious money.

Fourth, when in doubt, compare and contrast. For example, if you are presented with a variable annuity with guarantees that are hard to understand without an interpreter, ask a competing salesperson to present you with a product he or she would recommend. Have each person present the pros and cons of each product, but don’t stop there. Compare and contrast each prospectus as well, section by section.

Fifth, don’t buy something before getting answers to the following key questions:

1. What does the investment promise to deliver?

2. Under what conditions will the promise not be delivered?

3. If there are guarantees, against what, by whom and under what circumstances? Guarantees of any sort need to be studied closely, since they can be misunderstood. Unconditional guarantees don’t exist.

4. What are the risks associated with the investment in normal markets as well as in the worst-case scenario?

5. What is the most you can lose, and under what circumstances?

6. How can you get your money back?

7. Are there any penalties?

8. What are the tax consequences?

9. What are the costs of buying the investment, compared with the cost of owning the investment, and the cost of your selling the investment?

10. What does the salesperson make if you buy the product?

With the information you find in the prospectus, you can ask more direct questions and, ultimately, make a more reasoned investment decision.

As a rule, you don’t want to buy something until after you have read about and understood the benefits and the risks of the investment, especially if there is pressure to take advantage of a special feature, such as a bonus that is “only available until 3 p.m. today.”

If you are uncomfortable for any reason, pass up the opportunity. Others will come along.

If you would like more information on this topic, the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy has created a three-part series on reading a mutual fund prospectus (tinyurl.com/3c9btrhz).

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION