What To Do When Your Company’s Retirement Plan Stinks

A problem that many Americans face is the choice of whether or not to invest in a less than stellar retirement plan (401K, 403B) at work.  I’m talking about plans filled with lousy mutual funds with high expense ratios and bad returns.  So what do you do when you want to sock your money away for retirement and there are no good investment alternatives in your employer’s plan?

1) Complain to your employee benefits department.  This isn’t always going to help and certainly not fast.  You also risk pissing off the people who hired you.

 2) Consider, “Do I get a company match?”  If the answer is yes, you should at least contribute up to the match.  That is and always will be free money.  Virtually any match on your money will beef up crappy returns significantly.

3) After the match has been reached or without a match the decision becomes much harder.  Most people like the ease of investing in a company retirement plan because the money comes right out of your account.  Many people do not have the discipline to save outside of their retirement accounts for an IRA or after tax investing.  If this is you, use your company’s retirement plan.  A lousy plan is better than nothing. 

If you have the discipline to save outside of your work account than you are probably better off investing your next dollars in a low cost IRA or Roth IRA.  After these are maxed out you really need to run the numbers and see if after tax investing will make more sense than investing in underperforming mutual funds.


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