If everyone is upset about the 401(k) plan, it might be worthwhile to bring it to an independent company that has the freedom to choose any mutual fund, stock, bond, etc. Companies like Fidelity give you some freedom, but are mostly proprietary.

I have never used this forum as a place to sell my company or services; still, if you need to make some changes, consider an independent firm with independent thinking and investments.

If you can’t make a change to the plan, you may want to consider a separate account (it acts like a brokerage account) where you can buy and sell whatever you want. Just make sure the fees to do so don’t kill your returns.

I assume you mean a brokeridge account when you say a seperate account ??!! I do have this type account on my Fidelity 401k plan … I am able to buy and sell several hundred different funds … the problem is, I’m not a financial ‘wizard’ and research each fund to the best of my ability and choose many world funds that are averaging a 40% return if not higher, YTD, 1,3,5,10 and life of fund …

I guess my question is this, should I pay a financial consultant to help manage this 401k or continue managing this on my own ??? I have the V.P. and others following my lead since it got leaked out how my 401k returns have been doing … for instance LATX has been doing great overall and all indications tell me that it will continue to do well … TCWCX is another fund I’m going to buy into as soon as possible …

Otherwise, it generally makes sense (though this isn’t a recommendation) to get the full match and dump it all into an index fund. That way, you get the immediate 100% gain (for your $1 for $1) and then put your money into a fund that more than 80% of active managers can’t beat.

If your index fund earns 11% for ten years, your $1,000 contribution plus your employer’s $1,000 would grow to roughly $5,679 – a 19% average annual return on your contribution. If you took the $1,000, paid $300 in taxes, and invested the $700, you’d have to earn 23% for ten years to match that $5,679 end result. Possible, but then you also run into the problem of not saving.

I know – you’ll save every penny. But like me, you’ll have the occasional wedding gift, dinner out, new car, or other expense, and you’ll easily not save for one or two months every year. That would put you even further behind.

But first and foremost, see if you can get a separate account. Then, you’ll know which way to go.

Hope that helps!

Have you called your plan to ask about the possiblity of opening a self-directed account? You can trade shares in the open market with your 401(k) funds.

I recently started reading your blog from page 1, much like a book and love it! Here I am about half way through @ page 48 and this topic has sparked a question.

If I have a 401K plan where the company matches dollar for dollar up to 6% of your salary, should I participate to take advantage of the free money and before tax contribution, while risking it with a potentially crappy mutual fund tieing it up behind a penalty for the next 35-40yrs ? (Im 26)

Or would I be better off not participating, getting a bigger paycheck and allocating after tax dollars to a savings account and eventually an awesome business(stock) that I will find within the next 7 yrs that will earn 15%?

Do you have an example of how these two options would play out if carried on for 30 yrs with a 45K salary with 6% contribution to either my plan, or through the company’s 401K.

Summary: Is it worth the risk to get the company match and tax benifits?

I agree: complete garbage. Still, who is going to notice? So long as employees keep their heads down and everyone keeps quiet, the majority of Americans are headed for very serious financial problems and disappointment.

I also think the 401K is a scam because you’re not allowed to invest in the stocks you choose but only the 5-10 mutual funds available. How’s that fair? Who picks the mutual funds that are allowed to be in the list? I’m sure mutual fund companies scramble to be put on that small list of those to choose from. Then there’s the problem that if you actually know what you’re doing and what to invest it yourself you can’t without withdrawing the money which comes with a huge penalty.

Total garbage.

And for the record I participate in the company’s 401K i’m with but I’m not happy about.