Most working Americans are aware — and most financial professionals agree — that 401(k) plans and Individual Retirement Accounts (IRAs) are important retirement savings tools.

In my years reporting on personal finance matters, I’ve unfortunately encountered evidence that people who rely too much on Social Security monthly paychecks for retirement income find they are not nearly enough to support the lifestyle they hoped for.

Both radio host Dave Ramsey and AARP, the nonprofit advocacy organization for Americans over 50, are among the experts that highly recommend using 401(k)s and IRAs.

But they also strongly warn Americans saving for the future about some problems to avoid with their retirement accounts.

“If it’s not clear by now, we love the 401(k) for retirement investing,” Ramsey wrote. “But as great as it is, it’s not always enough on its own.”

A 401(k) can fall short when the plan’s investment menu is weak, fees are high, or there’s no Roth option available, according to Ramsey. It may also be insufficient if the plan structure makes it impossible for someone to reach a full 15% savings target solely through the 401(k) (a practice that Ramsey recommends).

“Most companies partner with a brokerage firm to administer 401(k) plans for their employees,” Ramsey explained. “Those firms usually provide a limited menu of investment options — mostly mutual funds, index funds and target-date funds.”

“You might look at your options and feel underwhelmed,” he continued. “If that’s the case, pick the best options available and invest up to the match. Then invest in a Roth IRA where you have more control.

Dave Ramsey recommends Roth IRAs with 401(k) plans

A Roth IRA is an individual retirement account that allows people to build long‑term savings independently of their employer. It functions as a personal investment vehicle, giving them full control over contributions and investment choices.

“The best tool you can use for investing beyond your 401(k) is a Roth IRA,” Ramsey wrote. “We surveyed more than 10,000 millionaires in our National Study of Millionaires. A huge majority (74%) said they invested outside of their workplace retirement plan. This isn’t an either/or situation — it’s both/and.”

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A Roth IRA, like a Roth 401(k), uses after‑tax dollars, so there’s no upfront deduction but the trade‑off is tax‑free growth and tax‑free withdrawals in retirement.

Note, however, that its annual limits are far lower than those for 401(k)s, allowing up to $7,500 in 2026 — or $8,600 for those age 50 and above.

Why Roth IRAs and 401(k)s work well together

Roth IRAs are good retirement savings tools to have alongside 401(k) plans. Here are some reasons, as Ramsey explains:

• A Roth IRA complements a 401(k) because its tax‑free growth and tax‑free withdrawals can boost the amount someone ultimately keeps in retirement.
• It adds flexibility by allowing investors to choose from a wide range of mutual funds, making it easier to pursue stronger performance and diversify across different fund types.
• These features may look small on paper, but over decades they can meaningfully increase the size of a retirement portfolio.
• Choosing between a traditional 401(k) and a Roth 401(k) is an important decision because both accounts share the same contribution limits and employer match, yet they differ significantly in how contributions, investment gains and withdrawals are taxed. (Source: Ramsey Solutions)

AARP warns workers about 401(k)s when switching jobs

Nearly six in ten American workers have access to a 401(k) through their employer, and those who change jobs generally face three choices, according to AARP.

They can move the old balance into another retirement account, cash it out and incur taxes plus a 10 percent penalty if under age 59-and-a-half, or simply leave the money in the former employer’s plan.

“A substantial number go with option three,” wrote AARP. According to Capitalize, a company that facilitates retirement-account transfers, Americans have left nearly 30 million 401(k) accounts worth approximately $1.65 trillion with previous employers,” AARP wrote.

Dave Ramsey and AARP explain mistakes to avoid with 401(k)s and IRAs.

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AARP explains 6 reasons not to leave a 401(k) behind

There are risks to switching jobs without taking money one has earned in their 401(k) plan with them. AARP outlines a few of them:

• You might forget about the account Old workplace plans are easy to lose track of, especially if you haven’t checked the balance or logged in for years.

  Losing access to portals or administrator contacts can make it difficult to locate the account or update beneficiaries when life circumstances change.

• You could be limiting your investment options Workplace plans often offer a narrow set of mutual funds, while individual retirement accounts typically provide a far broader menu of investments.

  More choice allows for better diversification and the ability to tailor a portfolio to personal risk tolerance and long‑term goals.

• You could be making your life more difficult Leaving multiple plans behind as you change jobs can create a scattered trail of accounts that are harder to monitor and manage.

  Consolidating balances into a single account can simplify recordkeeping and make it easier to evaluate whether your retirement savings are on track.

• You could forget to take an RMD Required minimum distributions at age 73 must reflect the total balance across all taxable retirement accounts, so a forgotten plan can distort the calculation.

  Missing or under‑withdrawing an RMD can lead to a significant tax penalty, which becomes more likely when accounts are spread out.

• You could lose control of the account After leaving a job, you generally lose access to support for managing the plan and must handle all decisions on your own.

  Corporate changes — such as mergers, closures or bankruptcies — can affect how the plan is administered and may result in actions you didn’t choose, such as forced cash‑outs or transfers.

• You could be paying more in fees Each workplace plan charges its own set of administrative and investment fees, which means multiple accounts can lead to higher overall costs.

  Smaller balances may be subject to mandatory distributions or forced rollovers, and moving the money yourself risks tax penalties if not completed within the required timeframe.

  (Source: AARP)

Related: Fidelity sounds alarm on 401(k)s, IRAs