Why Your BigLaw 401(k) Might Be Costing You Thousands

You're contributing to your 401(k). Maybe you're even maxing it out. You feel responsible. Adulting, handled.

Except there's a decent chance you're quietly hemorrhaging money to mistakes you don't know you're making. Not because you're careless. Because you're billing 2,200 hours a year and nobody handed you a manual for this stuff.

Your 401(k) is probably the largest investment account you have. The difference between doing it right and doing it "fine, I guess" can easily be six figures over a career. That's a year of freedom. A house down payment. The ability to leave BigLaw on your terms instead of someone else's.

Here's how to make sure you're not funding someone else's retirement instead of your own.

Mistake #1: Leaving the match on the table

This one seems too obvious to mention, and yet.

Many BigLaw firms offer a 401(k) match. The formulas vary: some match 50% of contributions up to 6% of salary, others throw in a flat dollar amount, some have profit-sharing components whether you contribute or not.

If your firm matches and you're not contributing enough to capture every dollar of that match, you're turning down free money. A 50% match on 6% of a $300,000 salary is $9,000 per year. Just handed to you. For doing nothing except clicking a button.

Over a decade, with investment growth, that's potentially $150,000 you declined to accept.

The fix: Find your plan's matching formula in your benefits portal. It's usually buried somewhere. Make sure your contribution rate captures every matching dollar. This is non-negotiable.

Mistake #2: Stopping at the match

Getting the full match is the floor. It's not the ceiling.

The 2025 employee contribution limit is $23,500. If you're contributing 6% to get the match and calling it a day, you're leaving serious tax-advantaged space on the table. On a $300,000 salary, 6% is $18,000. That's $5,500 below the limit, every single year.

That $5,500 annual gap, invested over 20 years at 7% returns, grows to roughly $250,000. And that's just from one year of under-contributing. Multiply it by every year you don't max out and the numbers get uncomfortable.

The fix: If cash flow allows, increase your contribution rate until you hit $23,500. If you can't max out right now, increase by 1% to 2% with every raise until you get there. You'll adjust to slightly smaller paychecks faster than you think.

Mistake #3: Paying fees you didn't know existed

This is where real money disappears, and it happens so quietly you'll never notice.

Your 401(k) offers a menu of investment options. Some charge high fees. Some charge low fees. The difference looks trivial on paper. What's 0.70% between friends?

A lot, actually.

On a $500,000 portfolio, a 0.70% fee difference costs you $3,500 per year. Over 25 years, assuming 7% average returns, the high-fee portfolio ends up roughly $300,000 smaller than the low-fee one. Same contributions. Same market. $300,000 less for you.

BigLaw plans typically offer both low-cost index funds (expense ratios around 0.03% to 0.15%) and actively managed funds (0.50% to 1.00% or higher). The actively managed funds sound fancier. They have impressive names. They are almost never worth the extra cost.

The fix: Log into your 401(k) right now. Look at the expense ratio for every fund you own. If you're paying more than 0.20% for a broad market index fund, check whether a cheaper option exists. In most BigLaw plans, it does. Switch.

Mistake #4: Overpaying for the convenience of target-date funds

Target-date funds are seductive. Pick the fund with your expected retirement year, and it handles everything. It adjusts your allocation as you age. Set it and forget it. Perfect for someone billing enough hours to qualify as two separate humans.

The problem is that some target-date funds charge significantly more than building the same portfolio yourself.

If your plan's target-date fund charges 0.60% and the underlying index funds charge 0.04%, you're paying a 0.56% annual premium for the privilege of not spending 15 minutes on this once a year. On a $500,000 balance, that's $2,800 per year.

Look, if you genuinely won't touch your 401(k) otherwise, a target-date fund beats neglect. But if you can spare 15 minutes annually, you can probably save thousands.

The fix: Check the expense ratio on your target-date fund. If it's above 0.15%, consider building a simple three-fund portfolio yourself using the cheapest index funds in your plan: total U.S. stock market, international stock, and bonds. Rebalance once a year. It's less complicated than most document reviews.

Mistake #5: Defaulting to traditional without considering Roth

Most BigLaw plans offer both traditional (pre-tax) and Roth (after-tax) 401(k) options. Most associates pick traditional without thinking about it, because that's the default, and who has time to think about this?

Traditional contributions reduce your taxable income now. You pay taxes later, when you withdraw in retirement. Roth contributions don't reduce your current taxes, but withdrawals in retirement are completely tax-free. All the growth, tax-free. Forever. (The same logic applies to the backdoor Roth IRA, which you should also be doing.)

The right choice depends on your tax rate now versus your expected rate in retirement. But here's something worth knowing: current tax rates are historically low, and several provisions are scheduled to expire in 2026. If rates increase, today's Roth contributions become even more valuable.

There's also the flexibility argument. Having both traditional and Roth money in retirement lets you manage your tax bracket strategically each year. Options are good.

The fix: Don't accept the default. Consider splitting contributions between traditional and Roth, or going all-Roth if you believe future tax rates will be higher (plenty of people do). Make this a choice, not an accident.

Mistake #6: Abandoning 401(k)s at former employers

Every time you change jobs, you leave behind a 401(k). Many attorneys have orphaned accounts scattered across two, three, four former employers like forgotten gym memberships.

This creates problems. You might genuinely forget about the money. (It happens. People find six-figure accounts decades later.) The old plans might have terrible investment options or higher fees than your current plan. And managing multiple accounts makes it harder to see your full picture.

The fix: Roll old 401(k)s into your current employer's plan (if they accept incoming rollovers and the investment options are good) or into an IRA.

One important exception: if you're doing backdoor Roth IRA conversions, rolling old 401(k)s into a traditional IRA triggers the pro-rata rule and creates a tax mess. Roll them into your current 401(k) instead to keep your IRA clean. (And if your current plan allows it, look into the mega backdoor Roth as well.)

Mistake #7: Never rebalancing

You set your allocation to 80% stocks and 20% bonds. A couple of good years later, you're at 88% stocks and 12% bonds. You didn't choose to take more risk. It just happened.

Most people set their allocation once and never look at it again. The portfolio drifts. Usually toward more risk than intended, because stocks tend to outgrow bonds over time.

The fix: Check your allocation once a year. If any asset class has drifted more than 5% from your target, rebalance. Most 401(k) platforms have a button that does this automatically. Click it.

If you're using a target-date fund, rebalancing happens for you. That's one genuine advantage of those funds, even if fees are slightly higher.

Mistake #8: Cashing out when you leave

When you leave a job, you can leave your 401(k) with the old employer, roll it to your new employer's plan, roll it into an IRA, or cash it out.

Cashing out is almost always a disaster. You'll owe income taxes on the full amount plus a 10% penalty if you're under 59½. That $100,000 balance becomes roughly $55,000 to $60,000 after the government takes its cut.

Worse, you've permanently lost that tax-advantaged space. You can't undo it. That $100,000, which would have grown to $500,000 or more over the next 20 years, is just gone. Spent on... what? You probably won't even remember.

The fix: Don't cash out unless you're facing a genuine emergency with no other options. Roll the money somewhere it can keep growing.

The 15-minute 401(k) audit

You can check all of this faster than your average conference call.

1. Am I getting the full employer match? If not, fix it today.
2. Am I maxing out $23,500? If not, increase your rate.
3. What expense ratios am I paying? Anything above 0.20% for a basic index fund deserves a hard look.
4. Is my target-date fund overpriced? If it's above 0.15%, consider DIY.
5. Traditional, Roth, or both? Make it a choice, not a default.
6. Do I have old 401(k)s floating around? Consolidate them.
7. Is my allocation still what I intended? Rebalance if not.
8. Are my beneficiaries current? Has nothing to do with returns, but matters.

The bottom line

Your 401(k) is one of your most powerful wealth-building tools. But it only works if you actually optimize it.

Most of these mistakes are fixable in an afternoon. The changes you make today could be worth hundreds of thousands of dollars by the time you're done working.

You spend plenty of time making other people's finances airtight. Spend 15 minutes on your own.