Your Company’s 401k Plan Could Mean Bad News for Your Retirement Savings


401k

On the Definitive List of Boring Activities™, saving for retirement ranks somewhere between going to the post office and waiting for an elevator. It’s the opposite of thrilling, but it’s a necessary task with a much-needed payoff in the future. Sure, it means spending less money on stuff you want now, but it results in not having to work in your own grave.

Since the late ’70s, 401k plans were used to make saving for retirement easier and more rewarding. In addition to potential tax benefits, a company-offered 401k plan could even match your contributions. This means free(ish) money for the future, with the potential to have that money make more money. Millions of people since bought into their company’s 401k plan and kickstarted their retirement fund.

There’s only one problem: most 401k plans cost quite a bit of money to manage. This might mean that the money you’re putting away gets taken in the form of fees and commissions by financial advisors and planners. They’re not going to take your entire savings away, but enough to make a sizable dent over a few decades.

How do you avoid losing your savings to nonsense fees?

YouTubers Mike and Lauren recently took a hard look at their company’s 401k retirement plan. What they found were high-cost funds managed by so-called experts who wanted a cut of their retirement savings. Yet instead of paying the fees and hoping for the best, they found a better cost-effective alternative. When you see how they turned their crummy 401k plan around, you might want to hit up your HR manager and do the same.

As Mike and Lauren mentioned, going with a low-fee option like index funds offer by Vanguard might be your best bet when it comes to your 401k. These funds are based on longstanding stock indexes instead of stocks picked by financial advisors. You’ll avoid high-priced commissions and fees associated with actively managed funds and still watch your savings grow over time. Otherwise, those advisors could end up taking more money than you’ll receive when it’s time to retire.

To learn more about 401k plans and how they could work for you, check out our 401k guide.


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