My understanding of 401(k)s:
1) They have higher limits than an IRA ($23k/$69k employee/combined contribution limit vs. $7k)
2) Your employer typically matches a portion of what you contribute, so that's essentially free extra salary
3) They're typically run with an exclusive brokerage and often have limited options for what funds you can choose
Can you help me understand the third point? I understand why a company wouldn't want to allow you to invest all your 401(k) money in a single biotech stock (which you COULD do in your personal IRA), but why are they so restrictive that they often don't allow you to contribute to Vanguard funds, insisting that you use some other institution's fund with a higher expense ratio?
And my last question: If I have a 401(k) in some fund I don't like because that was the best option that my employer offered, how can I move that money into a fund I like better? Like, say I'm in Fidelity's 2040 target fund, and I want to switch to Vanguard's 2040 target fund, would I have to quit my job to do that? Would quitting my job even allow me to do that? Would I be stuck in a suboptimal fund until retirement unless I took the 10% penalty on it?
1) They have higher limits than an IRA ($23k/$69k employee/combined contribution limit vs. $7k)
2) Your employer typically matches a portion of what you contribute, so that's essentially free extra salary
3) They're typically run with an exclusive brokerage and often have limited options for what funds you can choose
Can you help me understand the third point? I understand why a company wouldn't want to allow you to invest all your 401(k) money in a single biotech stock (which you COULD do in your personal IRA), but why are they so restrictive that they often don't allow you to contribute to Vanguard funds, insisting that you use some other institution's fund with a higher expense ratio?
And my last question: If I have a 401(k) in some fund I don't like because that was the best option that my employer offered, how can I move that money into a fund I like better? Like, say I'm in Fidelity's 2040 target fund, and I want to switch to Vanguard's 2040 target fund, would I have to quit my job to do that? Would quitting my job even allow me to do that? Would I be stuck in a suboptimal fund until retirement unless I took the 10% penalty on it?
Statistics: Posted by scintillator — Tue Jan 30, 2024 6:09 pm — Replies 4 — Views 291