Pick Two (401k Edition)

Tyler Linsten Personal Finance

…you can’t have the other.

Pick Two (401k Edition)


Sadly, and even with the recent proliferation of indexing, most workplace retirement plans are just not very good.

Combo 1: For most people it’s very possible to get a diversified portfolio at work, BUT, it’ll likely have elevated fees because the custodian of the plan has pumped the plan full of mutual funds that either give them a kickback on fees for the pleasure of being on the menu, or they’re proprietary funds so they keep ALL the expenses. Lovely, eh?

Combo 2: For those with some low-fee options, I’ve noticed that these choices are usually limited to a single US large-cap equity index fund and a cousin for international equities, so these folks are stuck with allocating the fixed income portion of their portfolio with a high-fee (read: actively managed) mutual fund (and it’s almost always the PIMCO Total Return Fund, which is a total drama show right now).

Combo 3: It’s very easy to get a low-fee, sufficiently diversified portfolio – but you probably won’t find it at work. If you can, congratulations, your employer cares about your future!