Given the increasing importance of 401(k) plans to the future retirement resources of workers, it is astonishing how many mistakes individual employees make. Financial advisors say the range of miscues run from the very basic–like not starting or not adequately funding one of these tax-deferred plans–to more sophisticated problems like tolerating higher-than-necessary fees or poorly allocating a portfolio.

For most employees working in the private sector, a 401(k)-like plan has become the only organized source of retirement income other than Social Security. That’s because cost-cutting employers have been abandoning traditional defined-benefit pension plans, which promised workers a specified benefit but put all the investment risk on the company to make good. In effect, 401(k)s put all the investment risk on the worker, who may or may not know how to handle that risk.

The 401(k) is named after the provision of federal tax law authorizing such plans, a provision that took effect in 1980. The new law allowed workers to defer taxation on a portion of their current income by putting contributions in a separate account. Employers were also permitted to make contributions without current tax consequences to the workers. Although not required, many firms match a portion of the employee funding.

There is no tax on growth of these pretax contributions to the account until the assets are taken out in retirement. But then all withdrawals are taxed at ordinary income rates, including long-term capital gains, which, if held in normal taxable brokerage account, would be taxed at a much lower rate.

A newer option, first allowed in 2006 and not yet offered in all 401(k) plans, is a Roth 401(k). As with a Roth Individual Retirement Account, already-tax money is contributed to a Roth 401(k), and all withdrawals in retirement are tax-free.

In return for the various tax breaks, 401(k) accounts come with a myriad of rules, largely imposed by federal law. The maximum contribution an employee under 50 can make for 2010 is $16,500. Anyone 50 or older by year’s end can toss in another $5,500 “catch-up” contribution. Those limits apply to the combined employee contributions made to a traditional 401(k) account and a Roth 401(k) and employees are free to contribute to both. All employer contributions, however, must go into the traditional pretax 401(k) account.

Note that special tax rules may prevent “highly compensated” employees at some companies from contributing the full $16,500. If you’re one of them, take note: If you’re 50 or older, you are still allowed to make the full $5,500 catch-up contribution.

Assets in a 401(k) plan can be invested only in ways specified by the employer. Some employers offer a “brokerage window” that allows an employee to invest in individual stocks and bonds and a wide variety of mutual funds. But most plans offer a limited number of mutual funds. Over time the range of options in the typical plan has expanded to include index funds, exchange-traded funds and other lower-cost investment vehicles .

Some companies also offer their own stock as an investment choice, and may even make matching contributions with their own stock. But most experts consider investing in employer stock dangerous for workers who, after all, already have their livelihoods linked to the company.

Employer stock is hardly the only risk facing workers, however. In fact, if you have a 401(k) plan, constant vigilance is advisable. A few years ago the U.S. Labor Department, which has some authority over the operation of 401(k) plans, issued a list of warning signs. They included periodic statements that came irregularly, inaccurate account balances and a decline in asset values not explainable by general market conditions. If you see a problem, start asking lots of questions. Remember, it’s your money and your retirement at risk.

But more often, workers suffer from problems of their own making. They don’t max out their contributions. They don’t even put in enough to get the employer’s full match, if there is one.

Another common problem: A worker will start a 401(k), specify what percentage of assets will be invested where (stocks, bonds, something else) and then not revisit that asset allocation for years or even decades, even as he or she nears retirement and needs a greater share of more stable investments, which usually means putting more in bonds and reducing the share of assets in stocks.

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Advice Is Critical To 401(k) Investing