5 reasons to invest in an IRA instead of a 401K. Not all 401k are created equal. Participating in your company sponsored $401K can be easy. Many employers sign you up for the plan automatically after thirty days of employment, and you don’t have to sign up. If you’ve have been consistently investing but your account is barely growing, there may be a good reason. Below are 5 reasons why your company 401K may not be best for you.
5 Reasons To Invest In A IRA
Your company match is nonexistent, no match.
- Most companies offer an employer match for every dollar you contribute up to a certain percent but there are companies that have discontinued the employer match for 401k contributions.
High Fees.
- If the investment options provided by your employer include high or expensive fees an IRA may be a better option. Most companies hire an outside agency to manage their 401K. Management companies charge fees that’s how they make their money. Mutual funds have fees. EFTs charge fees but many have low rates. High fees can greatly reduce the amount of savings over time limiting the amount that you can accumulate. Fees compound as well as investments making a huge difference in your balance. Many online investment brokers allow you to open an IRA for free.
Poor Investment Choices
- Choose investments that align with your goals. If the funds offered within your employers plan are not what you are looking for such as an S&P 500 then an IRA is a better option. You get to choose from many investment options such as an ETF, Mutual Fund or individual stocks.
Hassle Free Investing
- If you leave your employer, you don’t have to complete lengthy paper to rollover your investment.
Stay In Control of your Investments
- Your employer along with the 401k-management company can make changes to the investment options at any time. Yes, your beloved investment fund (example S&P 500) can be removed at anytime. If you miss the memo, your funds will be redistributed as they see fit without your approval. Stay in control with an IRA. Many companies offer them online such as Fidelity, Vanguard or Charles Schwab.
Poor investment choices, high fees, no company match are good reasons to bypass your employers 401K and invest in an IRA outside of your company. Stay in control of your future.
This is not personal financial advice. Please see a professional before making financial decisions.