Flex Your 401(k): Don't Tap It

If financial hardships make it necessary to tap your 401(k) savings, consider borrowing money from the plan. "If you withdraw, you are paying the taxes immediately and paying the penalty. If you're taking a loan, it's not considered a taxable distribution and no penalties are involved," explains Ritter.

But Ritter says you should use this option only in a dire situation.

Typically, you're allowed to borrow up to half your vested account balance but not more than $50,000. You have five years to pay back the loan and can take even longer if the money is going for the down payment on a primary residence. You pay interest as well as the principal on the loan to yourself, usually through an automatic payroll deduction. But the interest you pay goes into your retirement account instead of a bank.

Keep in mind that if you should lose your job or change jobs, the loan becomes due immediately. "If you can't pay it back, it's treated as an early withdrawal with corresponding penalties," Ritter says. Watch for one more step to fixing your 401(k) on Friday: Consider a Roth 401(k).