Even the worst high-fee, low-choice 401(k) is worthwhile — at least up to a point — if it includes an employer match on contributions. Never leave that money on the table. But for those workers stuck with a plan that lacks even that silver (dollar) lining:
Start with the DIY option
The 401(k) vs. IRA decision for those without an employee match begins by directing your initial retirement savings dollars into a self-directed IRA. After that, unless your plan is truly abysmal, direct money into your company 401(k) for the tax savings.
Look for an investing escape hatch
Some 401(k)s include a brokerage window — the option to open a self-directed account within the plan — which opens up the world of outside investment choices such as bonds, certificates of deposit, exchange-traded funds, other mutual funds and individual stocks. Here, too, be mindful of investment fees within the brokerage.
Get out early via an in-service distribution
It works like an IRA rollover — only you don't have to quit your job to do it — by allowing a current employee to move money from the 401(k) into a personal IRA without incurring early withdrawal penalties and taxes. Not all plans allow it, and often certain criteria must be met, such as being age 59½ or older.
Lobby for improved conditions for everyone
Talk to your human resources department, benefits committee or even the chief financial officer to push to include lower-fee investment options in the plan. You may want to encourage co-workers to do the same. More voices can't hurt.
Take the money and run
But only after you have officially parted ways with your employer or you will get stuck paying taxes and penalties. The right way to roll over a 401(k) to an IRA is to set up a direct rollover from your former workplace plan into an IRA. For more details, see NerdWallet's complete guide to 401(k) rollovers.
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