4 Telltale Signs You Have a Lousy 401(k) Plan

We aren’t always as aware of our 401(k) performance as we should be. After all, we feel good about simply contributing and putting away money for our future. But, one day, we’ll be nearing retirement age and realize that maybe we didn’t save as much as we could have. 

The difference between saving enough and saving as much as possible could lie in the type of plan you choose to invest in. Unfortunately, the plan your employer offers might not always be in your best interest.

401(k)s can be a fantastic option for retirement savings, under the right conditions. These accounts are a tax-deferred way to contribute to your retirement funds that can, if well-invested, provide you with a significant return.

Before accepting your employer’s 401(k) plan as the best option, take a few minutes to explore your options. While your employer means well, they might not have you set up with the best plan for your future. 

Let’s take a look at four telltale signs that your 401(k) plan isn’t working for you the way it should.

Your Employer Doesn’t Offer Matching

Some of the more favorable 401(k) plans include employer contributions. For employers who do match your 401(k) contributions, the most common amount is a 50% match on the first 6% of your salary. With this benefit, your 401(k) grows quickly without taking more out of your paycheck.

If your employer matches your contributions, congratulations! If not, it’s wise to consider your options. Without matching, your 401(k)’s other benefits don’t have as much impact.

This isn’t to say you should never use a plan that doesn’t include employer matching. However, if your plan doesn’t offer matching and the other benefits of the plan also don’t measure up (see points 2–4), choose a plan with a better potential return.

The Plan Offers Poor Investment Options

Investment option preferences vary from person to person. They depend on age, investment knowledge, and how active the person wants to be in reviewing their investments. For example, some see a large variety of investment options as an asset, whereas others view it as overwhelming.

While preferences depend on the individual, it’s ideal if your plan offers several low-cost mutual funds that allow you to choose diversified stocks, bonds, and cash. On the other hand, it’s possible that limited funds can provide you with a small set of good investment choices. But, it also might not include specific investments you’re looking for. Talk to your financial advisor about your retirement goals to determine if your 401(k) plan’s investment options fit your future.

The Fees Are High

Between losing money on investment costs and administrative fees, your 401(k) can suffer. Of course, there are healthy amounts of both, but it’s crucial to know how much you’re spending. Make a point to review the 401(k) plan’s quarterly and annual statements. Understanding the investment will help you keep costs and ROI in mind.

It Has a Long Vesting Period

A vesting period is the amount of time you must work for a company before your employer’s match contributions become yours. During this period, the company retains ownership of that money until you’ve worked for the company for a certain number of years. The length of an investment period varies between companies.

The longer the vesting period, the higher the chance of you losing those contributions if you leave your employer. If this is a job you plan to keep for the long term, this likely won’t affect you. Otherwise, you should consider how the vesting period might affect your ownership of those contributions. Talk to your HR department to determine your 401(k)’s vesting period.

What If Your 401(k) Plan Is Lousy?

It’s not too late to readjust your retirement. Consult with a financial advisor to ensure that your 401(k) plan is designed to meet your retirement needs and expectations. A professional can analyze your financial health as a whole and guide you to get the most out of your savings. 

Contact Southwestern Investment Group to learn more about the right 401(k) plan for you.

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Jeffrey T. Dobyns

CFP®, CLU, CHFC

President, SageSpring | Financial Advisor, RJFS 
615-861-6102

Jeffrey T. Dobyns

President, SageSpring | Financial Advisor, RJFS

Beyond crunching numbers and investment strategies, at SageSpring, we’re about building relationships. When you encounter Founder & President of SageSpring, Jeff Dobyns, it’s easy to understand why this is at the very heart of who we are as a firm. You won’t find stuffy formalities with Jeff; instead, you can expect to find him sharing a warm smile, communicating a compelling vision, or patiently untangling life’s complex challenges with clients. He believes in truly getting to know clients, understanding their aspirations and priorities, and navigating their financial plans with a tailored, comprehensive approach. Our team members have often been caught taking notes on Jeff’s effortless relationship skills from a distance, and we admire them for striving to learn from one of the best. 

Jeff’s financial expertise and wisdom are the perfect match to his innate people skills. Jeff holds the prestigious CERTIFIED FINANCIAL PLANNERTM certification, Chartered Life Underwriter (CLU®), and Chartered Financial Consultant (ChLU®) designations, and has held executive positions with financial planning firms for more than two decades. 

His dedication extends beyond the office to the boardroom and the local community, where Jeff is passionate about giving back. He serves as Chairman of the Board of Men of Valor, a prison ministry and mentoring program. Jeff also serves on the board of Send Musicians to Prison, which shares hope, healing and restoration with the imprisoned through musicians & artists. Jeff actively supports other initiatives in the community by sitting on the board of The Signatry of Middle Tennessee and the Halftime Institute of Nashville. 

Witnessing his four children, Gracyn, Hunter, Tanner, and Logan, excel on the field is almost just as rewarding, if not more, than celebrating the victories of seeing his clients overcome obstacles and build wealth. Spending weekends boating on the lake, hiking mountain trails, and fishing with his family are the moments Jeff cherishes most. It’s this grounded perspective that reveals the true meaning of wealth for Jeff: not just numbers on a page, but the freedom to create experiences that enrich your life and the lives of those you love. When you choose the Dobyns McMillin Wealth Team, you choose more than financial expertise. You choose a partner who champions your dreams, celebrates your victories, and walks besides you on the path to achieving your unique goals.

**Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER TM, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.