You can’t expect Social Security to provide you with enough income to cover all of your retirement expenses. That’s where personal savings come in. And in that regard, you have options.
If your employer offers a 401(k) plan, you may be inclined to participate. This especially holds true if that plan comes with a generous employer match.
In a recent New York Life survey, 55% of respondents say they house their retirement savings in a 401(k). But while these plans have their benefits, they also have their drawbacks. And so you may want to consider another home for your money.
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The problem with 401(k)s
Let’s get one thing out of the way. Some 401(k) plans are better than others, so while your neighbor’s plan might leave much to be desired, your plan might be fantastic. But generally speaking, there are certain disadvantages you might encounter when you save for retirement in a 401(k).
First, let’s talk fees. You’ll commonly pay hefty administrative fees with a 401(k), and those generally aren’t negotiable.
Then there are investment fees to consider. Some 401(k)s offer more choices than others, but if your options are limited, you could get stuck having to load up on mutual funds with high fees, or expense ratios, that eat away at your returns.
Now to be fair, most 401(k) plans do offer a combination of actively managed mutual funds and low-cost index funds, which are passively…
