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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2 weeks ago
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The difference in expense fees between the two funds would need to be weighed against what the actual and anticipated returns of the funds are. For example-if the growth fund is anticipated to return 10% and the target date fund is 8% then I'd advise staying the course if those are your only investment options and if your risk tolerance allowed for it. It's not what you pay but it is what you make that is important and how the investments fit into your overall portfolio diversification strategy. Don't miss looking at the forest because of a couple of trees.

With an estimated 25-30 years before you reach retirement that is more than sufficent enough time to really use the advantage of tax deferred gains in your account to your benefit and maxing out your 401K contribution is probably prudent. Plus, you'd continue to shelter some of your current income from taxes now.

As to your employers choice of 401K provider, while there are many factors for them to consider, investment fees just being one thing you may want to ask them when is the last time they looked at other providers. They need to be made aware that more and more companies are being sued for not performing their fiduciary duties. For example, Boeing in November 2015 agreed to pay $57 million to resolve plaintiffs’ claims that it selected and retained mutual funds with excessive management fees in their 401K and even smaller companies are now being sued. 

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