The 401k has become the main entry point into investing for many Americans and rightfully so. It’s ease and accessibility through employers have made this a staple in retirement plans since it came onto the scene in the 1970s. How well are you doing with your 401k investing? Are you contributing at all? Are you getting your full match? What are the fees associated with your plan.
It still amazes me that there are people who are gainfully employed, work for a company that offer a 401k but decide not to contribute to any type of plan. This is as good as financial suicide. You will be repeatedly kicking yourself in your later years. A 401k should be a small part of any retirement plan, not the only option. Therefore if there is only one entry point into retirement plan the 401k should be the first option if available.
If you work for a company that offers a match you should always contribute up the amount that will allow you to receive the full match. If your employer says you must contribute 3%, to receive a 3% match, than always contribute at least 3%. Not contributing enough to receive a full match is leaving money on the table.
Have you reviewed your plans performance over the last year? Chances are you will see small deductions from each fund you are invested in. These costs are fees that can range from administrative fees, investment fees and service fees among others. Be mindful of these fees over the lifetime of you being invested. A good match can help to mitigate some of the plans fees. But a low match and high fees may cause the 401k to be more of a detriment than a benefit. Fees can range anywhere from .31% to 1.88% which can be over six figures in total fees through the lifetime of your plan.
The main takeaways are be sure to invest in a 401k if offered, always contribute up to the full match, and understand what fees are being accessed to your plan.