Employer offered 401K (unmatched) wiith questionable Financial Group
Terry,
My employer is offering 401K plan (unmatched). While I’m disappointed that my employer doesn’t offer any match, contributing to a 401K would still get me on the road of building a retirement fund. But (!), I question the financial group that my employer has selected to manage the 401K plan. Can I start a 401K on elsewhere on my own? If yes, your direction as to how to go about this would be appreciated. Thank you.
Terry Says
You can’t start a separate 40l(k) plan unless you are self employed or an independent contractor. But you can open an IRA — and since you say you are “getting started” (and thus likely under 50) you can open such an account at Vanguard or Fidelity and contribute $6,000 for 2020, and another $6,000 for 2021.
Will that cover the amount you are able to save for retirement out of your current income? A 40l(k) lets you save up to $19,500 a year depending on your income. And you’ll also want to check on the tax deductibility of your IRA contribution, if you don’t use the 40l(k). That is based on your income. And, if your contribution is NOT tax deductible to the IRA, then make it a ROTH IRA so that in the future all the growth of the money will come out tax-free.
And, you are pretty sharp to spot a 40l(k) plan that is either too costly or has too narrow a choice of funds. You should anonymously bring this to the attention of the HR department or the bosses, because the company has a liability if it chooses a company with excessive fees. Many major companies have recently been sued for this type of “fiduciary” mistakes such as high expenses.
Maybe you can find a way to send this article on MarketWatch to the HR department for their education on this subject!
