Here's how to tell if your 401K SUCKS | Morris Invest

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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!” Yeah… 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! Researchers at Yale University studied the excessive fees inside 401k plans and determined that fees totaling over 1% are hurting your retirement savings.So what can you do if you’re paying high fees? Well, depending on your employment status, you might be locked into your account. In that scenario, here are your options: first – give your provider a call. Seriously – ask about those fees! The first step to changing this system is awareness, and we can do that by demanding transparency from these companies that profit from a lack of financial education.

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.Another option, of course, is to start buying rental properties that can provide you with cash flow. You can even do this inside of specific retirement accounts. Check out my video on The Pros and Cons of Using Real Estate Inside Your Retirement Plan to learn more.

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.

Listen, I don’t care whether or not you invest in a 401k; I have no dog in the fight when it comes to how you live out your retirement. Here’s what I do care about: whether you are empowered and educated about your options. That’s what I want for you—empowerment
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