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Americans say not investing in a 401(k) is the biggest financial mistake

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Three out of four Americans admit they've made a financial mistake. The biggest? Not investing in their 401(k), according to a Harris Poll of over 1,000 U.S. adults commissioned by TD Ameritrade.

When it comes to retirement, Americans need to be in the driver's seat and fully engaged, Wende Rhodes, vice president of branches at TD Ameritrade, tells CNBC Make It. "We can't afford to be passengers," she says. And having and funding a 401(k) is a powerful tool to help you save up for a secure financial future.

"As you get older, your priority becomes retirement," Rhodes says. If you don't invest in your 401(k) or you're not leveraging it fully, that becomes a "regret," Rhodes says. "It limits your future choices."

That's not to say people are forgoing 401(k) plans entirely. Americans have $5.7 trillion invested in employer-sponsored 401(k) plans, according to the Investment Company Institute. That's about 20% of the total retirement pie in the U.S.

But many times, Americans are not taking full advantage or investing as much as they could be. About 47% of those aged 25 to 34 have access to a workplace retirement plan like a 401(k), according to a recent academic report from Stanford University. But far less invest and even fewer are able to max out their 401(k) on an annual basis.

In 2019, you can contribute up to $19,000 in your 401(k), and if you're over 50 you have some additional opportunities to contribute even more. Of course, maxing out your 401(k) may not be financially possible.

If that's the case, invest what you can now. Aim to at least put away enough to take advantage of any employer's match, a program where your employer contributes the same amount that you do to your 401(k), up to a certain point.

For example, if you put 5% of your salary into your 401(k), your employer also contribute 5%. If you make $60,000 a year that's basically a $3,000 raise. But you only get that money if you're investing in your employer's retirement program. The median matching level is 4% among Vanguard 401(k) plans.

"You should be taking full advantage of a company match," Rhodes says. This is basically free money toward your retirement, and it can be a huge disadvantage if you skip it.

Not sure you have one? Ask your manager or HR representative. And if your company doesn't offer a 401(k) at all, consider opening an IRA, Roth IRA or a taxable brokerage account. If you're self-employed, you can enroll in a SEP IRA or a solo 401(k) plan.

When split by generation, millennials (ages 22 to 37) say their biggest mistake is not their 401(k), but rather their lack of an emergency savings, followed by having a low credit score.

"Your priorities shift over time, so it's natural that millennials — being early on in their careers— are much more concerned about the immediate needs," Rhodes says. As they continue to mature, that starts to shift toward regrets over their 401(k) funding habits.

Funding an emergency savings is crucial, especially when you're young, Rhodes says. "At that stage in life, an emergency coming up can totally knock you off track," Rhodes says. Whereas further along in life, you may be able to weather it easier because you're earning more.

Don't miss: Here's what the average American typically pays in 401(k) fees

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