Most people get their start with investments participating in their company’s retirement plan, and recently 401k’s are the most common plan used amongst employers. Once you leave or retire from your employer you have some options with your old 401k!
401k’s usually are very costly for employers to create, implement, and run. Not all 401k’s are built the same-depending on size of company, investment options made available, and costs. The two biggest items I would urge people to look into are costs of 401k’s-including investment, administrative, individual service, and custodial fees; and secondly investment options that are available in a 401k. Unfortunately 401k’s can be very costly, especially for smaller plans which can approach 1-2% a year. To keep things simple, which can be helpful getting people started and engaged, 401k’s have a “default” starting fund depending on someone’s age- and secondly keep the number of investment funds to a few to limit overwhelming workers choosing what to pick.
One option I would recommend people to explore is a rollover, which is when you move an old 401k into an individual retirement account (IRA). IRA’s can be cheaper in fees and has more investment options. Along with a bigger lineup of mutual funds IRA’s offer ETF’s, stocks, and if inclined options. These options can greatly help someone build a diversified portfolio while lowering their costs, which can be a huge advantage keeping more of your hard-earned savings. For those also wanting a financial professional to manage your retirement nest egg, an IRA is much easier for a financial advisor to manage vs a 401k.