Ep. 15 Is Maxing out Your 401k really the best choice?
In this episode of the Red Barn Financial Podcast I explore the alternatives to investing in your 401(k) or other work plan. While your 401(k) plan is a great investment option when the company offers you a match, it may not be the best place to invest money that isn't being matched.
There are two reasons why you may want to invest money that isn't matched in your company plan outside the company plan:
1. It's quite likely that your company plan fees and investment options are costly. For example if you are paying 2% in fees, that means your investments need to go up 10% for you to net 8%. What are you getting for those fees?
2. You are limited to what the company chose as investment options for you. If they picked 10 funds, you can't invest in individual stocks, other ETFs or mutual funds that you like and might be less costly for the same investment.
I share some alternatives like investing in a Roth IRA or other deferred compensation plan as well as looking at a brokerage account as another place that you can store up as much money as you choose to save. Then there are life insurance products and if you own a business you can choose a deferred compensaiton plan.