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Tips for Dealing with a Bad 401(k)

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Most employers offer a 401(k) plan to employees as part of their benefits package, but what happens when you find out that your 401(k) really isn’t that good? A good 401(k) plan includes a variety of investments and doesn’t impose extensive fees for maintaining it. A bad 401(k) may only include a couple of weak investments and you may be responsible for paying hefty fees just to keep it. If you find that your 401(k) isn’t as good as you though it would be, and you think you might be better off getting your own account, here’s what you need to do:

1. Assess your current investments’ performance. A good 401(k) plan doesn’t include a lot of your company’s own stock. If yours does, it may be time to find out how well your other investments are performing. Find out how other funds are doing on the stock market by looking for the funds’ ticker symbols online, or in the newspaper.

2. Decide if the employer contribution is enough. A good employer 401(k) account matches about 50 cents for every dollar an employee contributes. If your employer is contributing much less than that, consider other investment options. In the long-run, the employer’s contribution may not be worth it and you could be better off with your own account or different type of investment account.

3. Take a close look at fees. Mutual fund fees should be minimal, but some types of accounts require you to pay very high fees to keep the account active. Many accounts also impose administrative fees. If your employer has set up an account that has very high fees, it may be time to make some changes.

4. Start contributing less to your employer-matched fund. If you do decide that your employer’s 401(k) is costing you more than investing in a regular account, it’s time to reallocate your investment dollars. Talk to a financial advisor about setting up an independent account but continue to contribute to your 401(k) – only much less than you have.

5. Remember you can roll your 401(k) into an IRA. When you leave your company, you do have the right to roll your 401(k) into an IRA, and this could open up even more investment options for you. Keep this in mind as you begin making your financial and investment decisions, and work with a financial advisor for tips and suggestions. Your financial advisor can guide you through the rollover process and ensure that you are making the most of your investment dollars.


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