Is your 401k plan garbage?

I look at what my client's employers offer in their 401k plans and advise them on the best option. The results disgust me much of the time. Why? High priced mutual fund products are the ONLY OPTIONS for the participants. Some of these companies offer generous matches which does lessen the blow, but it still pains me to pick funds that charge ten and twenty times as much for the same product.

How would you feel if someone tried to sell you an Iphone for $ 10,000 or $ 20,000? That is what is happening in the 401k space.

What can you do about it?

1. Politely ask your HR person to add a low cost index fund option ( some employees go defcon one to achieve this)
2. Realize that the moment you leave your employer, you are able to rollover your plan to a traditional or roth ira at a superior provider.
3. If married and not already maxing out both spouses 401ks, focus your funds on the best plan between the two of you.

These are just a few ideas with other options remaining. The next philosophic question to ask yourself is, "Why would my employer (who I thought loved me) offer such a bad plan?"

As with many questions, the answer is simple... money!

Put yourself in your company's shoes for a moment. One 401k administrative firm offers to provide their service for free to your company. The other will charge $ 2,000 annually per participant, but will offer low cost products.

Which do you choose? Such is the rough and tumble world we live in. This is why you must invest in yourself, so that you can invest for yourself.