Anytime I talk about the downfalls of the popular retirement plan, the 401k, there’s always a few people in the comment section protesting. If you’re one of the lucky few that has been able to build a large retirement savings inside a 401k, that’s great! But unfortunately, this isn’t the norm. Most people who put money into a 401k aren’t able to save enough to fund a comfortable retirement.
There are many reasons why the 401k fails investors, and I have plenty of videos I can direct you to if you’d like to learn more about this… But if you’re squirreling your extra dollars into a 401k, blindly wondering if it will be enough for retirement, today’s show is for you. We’re going to cover a few ways you can tell if your 401k sucks.
More About This Show
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High fees. If your 401k plan is riddled with high fees, your plan administrator is undoubtedly taking advantage of you. And if you’re thinking, “I don’t even know what types of fees I’m paying on my 401k plan!” You’re not alone. A 2021 report released by the Government Accountability Office found that nearly 40% of Americans do not fully understand the fees in their 401ks. Even worse, 41% of investors don’t even know their 401k has fees at all! That’s how they get you. A lot of these fees are purposely unclear. There is NO education around the 401k. It’s time for you to take a look at your statements and get a clear understanding of exactly how much you’re paying in fees on a monthly and yearly basis.
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No employer match. 99% of people I hear from who are happy with their 401k have one thing in common: a great company match. And really, that’s about the only scenario in which a 401k makes sense.
But if you’re having part of your paycheck funneled into your 401k and your employer isn’t matching it, you’re really doing yourself a disservice. If this is you, consider changing your contribution and exploring other retirement plans you can set up on your own. You’re not limited to using a crappy 401k. There’s a whole world of other retirement plans out there, and you can contribute an additional $6500 per year into an IRA. -
Extremely poor or limited investment options. Some people will try to tell you that fewer investment choices are better, but this only applies if you have very little financial education. The average 401k offered from Vanguard has about 27 investment options, but some may offer as little as three! Diversification is important when it comes to investing, so make sure your plan offers enough investments… and if it doesn’t be sure that those few investments aren’t riddled with fees.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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