Should I raise my 401(k) contributions even if fees are too high?

I currently contribute 5% to my 401(k) while my employer gives me a 4% match. I am 37 years old and in the 25% tax bracket. Unfortunately, my employer uses a poor brokerage as its 401(k) provider. I would like to start contributing 15% to my 401(k), but the fees are too high. The growth fund that I am currently in has an expense ratio of 1.33 and I would have to rebalance over time. Does it make sense to raise my contribution to 15%? If not, would it be better to change my investment fund to a retirement target date fund with a 1.25 expense ratio? All of the firm's funds are too high but I would like to contribute 15%.

Investing, 401(k)
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July 2017
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As a Participant, don’t get too hung up on the expense details regarding 401k plans. Investment fees are but one part of the fee structure to pay for the administration of an employer sponsored retirement plan.  Often revenue sharing from those fees are paid to recordkeepers, administrators, custodians, etc., to provide services to the plan. Talk with your firm’s management about when they last reviewed other plan providers, it might be time....

 

I think you have a decent idea of using lower cost funds that are available in the plan, if you can augment that investment with outside investments that give you a well-rounded overall portfolio. At 37 years of age and a 25% tax bracket, contribute as much as you can, and if your plan offers a Roth 401k contribution option you should seriously consider it. Money you put away now has a long, long time to grow!

Hope this helps.

Steve

July 2017
July 2017
July 2017
July 2017