"Just because they contribute to a 401(k), they immediately think they will have a good return," he said. "That isn't the case. A good diversification may just give a better return and that represents more money for you at retirement."
Some employees face an even more daunting prospect as more companies have eliminated their 401(k) programs permanently and do not offer any retirement options.
The number of employees without a retirement plan at work has been rising steadily for the past 15 years with almost half of all private sector employees without a retirement plan now, said Patrick Morris, CEO of HAGIN Investment Management in New York.
In 2000, about 60% of employees in private sector jobs had a retirement plan, a number that was in steady decline until 2006 to 2008 when it briefly declined, he said. The number dipped again after the recession.
"Simply put, employers are cutting back benefits to either increase profits or simply return to pre-recession profit levels," Morris said.
In 2011, the average employer match was 2.5% with about 5% of the 500,000 plus plans offering zero, he said.
The real trap is the cost of the 401(k) plan and how it is covered either by the employee of the employer.
"There are a number of places to check, but the overall 'quality' of a 401(k) compared with other similar companies can be easily checked if your plan is listed on one of the online resources," Morris said. "If your plan is private, then it is harder to measure it against similar plans at other companies."
Spreading out your contributions each month spreads the risk and prevents investors having to figure out how to "time" the market, he said.
"I am not a fan of doing it all at once," Morris said. "That is not to say that you should stretch out the contributions if you don't think you will have the money later in the year. In reality, biting the bullet and just contributing offers the out of sight, out of mind advantage that you won't spend the money elsewhere."
While Millennials and Gen X-ers face higher health care costs and student loans payments and may lack the funds to contribute to a retirement plan, the long-term benefits of saving early outweigh cutbacks that occur, he said.
"The benefits of saving what seem like small amounts of money early in your career at the cost of some of your fun or the cost of your standard of living doesn't have the type of immediate payoff that makes it compelling," Morris said. "Furthermore, market volatility can erase gains and principal very quickly. This can be quite disappointing to someone who has been trying to diligently save to get ahead."
Retirement is maximized by saving early since the power of compounding means that a ten-year difference in when an investor starts can make a huge difference, he said.
"A lower cost 401(k) with a high match is a key benefit that should not be overlooked and needs to be maximized," Morris said.
Investors who work at companies where there is not a matching plan should instead allocate their money in a traditional IRA or Roth IRA, which are lower cost and more efficient alternatives.
While making consistent contributions to your company retirement plan minimizes downside risk, employees should consult with their plan administrator since some companies require participants to contribute a minimum amount of their pay to the plan throughout the entire year to receive the full company match, said ReKeithen Miller, a certified financial planner in Atlanta with Palisades Hudson Financial Group.
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"Saving for retirement involves a lot more psychology than most people like to admit," he said. "Many 401(k) participants focus on how their take home pay will be impacted when making a decision about contributions, so spreading out the contributions can make it more palatable."
-Written by Ellen Chang for MainStreet