I have a horrible 401k plan, with high expenses.  Should I stay with it or move my money elsewhere?
2%? I would put in just what it takes to share in the profit sharing, not a dime more. My S&P fund cost is .02% (edited, as it dropped to .02 since original post), 1/100 of the cost of most funds you list. Doesn't take too many years of this fee to negate the potential tax savings, and not many more to make this a real loser. The first question is essentially asking for specific investment advice which is off-topic per the FAQ, but I'll take a stab at #2 and #3 (2) If my 401k doesn't change before I leave my job (not planned in the   near future), I should roll it over into my Roth IRA after I leave due   to these high expense ratios, correct? My advice is that you should roll over a 401K into an IRA the first chance you get (usually when you leave the job). 401K plans are NOTORIOUS for high expense ratios and why leave your money in a plan where you have a limited choice of investments anyway versus a self-directed IRA where you can invest in anything you want? (3) Should I still max contribute with these horrible expense ratios? If they are providing a match, yes. Even with the expense ratios it is hard to beat the immediate return of an employer match.  If they aren't matching, the answer is still probably yes for a few reasons: You already are maxing out your ability to contribute to sheltered accounts, so assuming you still want to sock away that money for retirement, the tax benefits are still valuable and probably offset the expense ratios. Although you seem to be an exception, it is hard for most people to be disciplined enough to put money in a retirement account after they have it in their hands (versus auto-deduction from paychecks). As to the rollover question.  Only rollover to a ROTH if you have other funds you can use to pay the taxes you will be hit with if you do that.  DO NOT pay the taxes out of the funds in the 401k. If you don't have a way to pay the taxes, then roll it to a traditional IRA.  You never want to pay the government any taxes 'early' and you don't want to reduce the balance. beyond that, A lot depends on how long you figure you will be with that company.  If it's only a few years, or if you and other employees can make enough of a fuss that they move the fund to someplace decent (any of the big no-load companies such as Vanguard would be a better custodian), then I'd go ahead and max it out. If you figure to be there for a long while, and it looks like someone is in bed with the custodian and there's no way it will be changed, then maybe look to max out a Roth IRA instead.
"It's simple. At 100% match, it would take a ""long"" time for bad fees to negate the benefit. Longer than the average person stays with one company.  Even though $50/10 shares is crazy, if you wait till you have $500, it's 10%. Still crazy, but you are still getting 90% of the match. I'd avoid this, however, and just go with the closest thing they have to an S&P fund. Invest outside this account to save the right amount to fund your retirement. 2% total isn't enough, obviously." With an appropriate selection within a 401K and if operating expenses are low, you get tax deferred savings and possibly a lower tax bracket for now.  The returns vary of course with market fluctuations but for almost 3 years it has been double digit growth on average.  Some health care sector funds were up over 40% last year.  YMMV.  With stocks and mutual funds that hold them, you also are in a sense betting that people want their corporations to grow and succeed.  Others do most of the work.   Real estate should be part of your savings strategy but understand that they are not kidding when they talk about location.  It can lose value. Tenants tend to have some problem part of the year such that some owners find it necessary to have a paid property manager to buffer from their complaints.  Other owners get hauled into court and sued as slum lords for allegedly not doing basics. Tenants can ruin your property as well.  There is maintenance, repair, replacement, insurance against injury not just property damage, and property taxes.  While some of it might be deductible, not all is.   You may want to consider that there are considerable ongoing costs and significant risks in time and money with real estate as an investment at a level that you do not incur with a 401K.  If you buy mainly to flip, then be aware that if there are unforeseen issues with the house or the market sours as it can, you could be stuck with an immovable drain on your income.  If you lose your job could you make payments?  Many, many people sadly lost their homes or investment properties that way in 2008-2010. "As Mhoran answered, typical match, but some have no match at all, so not bad.  The loan provision means you can borrow up to $50k or 50% of your balance, whichever is less. 5 year payback for any loan, but a 10 year payback for a home purchase.  I am on the side of ""don't do it"" but finance is personal, and in some situations it does make sense. The elephant in this room is the expenses within the 401(k). Simply put, a high enough expense will wipe out any benefit from tax deferral. If you are in this situation, I recommend depositing to the match, but not a cent more.  Last, do they offer a Roth 401(k) option? There's a high probability you will never be in as low a tax bracket as the next few years, now's the time to focus on the Roth deposits, if not in the 401(k), then in an IRA." I like the way you framed this question.  There is no single right answer for what to do with your savings, but there are some choices that are wrong in the sense that they are dominated by other choices you could make.  Of the choices you listed, there are two that fall into that category.  The ones that seem like a bad idea to me are: Putting it into your Roth 401(k).  You can't do this directly anyhow, but you could do it indirectly by increasing your contributions and using the growth fund to cover the hole in your budget, but that's a lot of work for a relatively small gain.  You would essentially be exchanging one long-term investment for another long-term investment.  You would pay capital gains taxes on the investment when you sell it today, in order to not pay taxes on its earnings when you eventually withdraw it.  There is some benefit there, but it's a long way off, not that large, and probably not worth the effort.  Things that might change your mind:  If your 401(k) was a traditional 401(k) (paying tax at capital gains rate today to get a deduction at your normal income rate is likely to be a win).  You're not contributing enough to get the full company match (always try to get that match if you can). Putting it into your emergency fund.  Once again, you are likely to pay capital gains tax if you do this, and you will be putting it into an investment that is likely to get a lower return than your current one.  It isn't really necessary to incur these costs, since if you encounter an emergency that you can't cover with your existing emergency fund, you could always liquidate the growth fund then, when you know you need it.  Now, a growth fund is going to be more volatile than what you would normally want for an emergency fund, but the risk isn't that bad, if you think about it.  Say your emergency comes up and you find that the growth fund is down 20% (which would be a pretty horrible run).  That's $600 less that you have to deal with the situation.  Keep in mind that you already have $2000 (and building) in your current emergency fund.  Is that $600 going to make the difference between meeting the need and not?  It's not likely.  Better to leave the investment where it is and keep building your emergency fund week by week.  Things that might change your mind: Your level of risk aversion (if having that money in a more risky investment is keeping you up at night, move it).  You face significant job uncertainty (if you have reason to think your job is at risk, it might be a good idea to top off that emergency fund sooner rather than later.) Your other two choices both seem like solid options under the right circumstances.  If it were me, I'd leave the investment in place rather than use it to pay off the student loan.  The investment is likely (though of course not guaranteed) to earn more than the interest rate even on the highest-rate loan, especially when you consider that the interest on the student loan is probably tax deductible.  Moreover, the size of the investment isn't enough to fully repay the loan, so putting it toward the loan won't even improve your cash flow for some time to come.  However, there is always a chance that the investment will perform poorly and some people prefer the guaranteed return from paying off the loan.  It depends on your personal risk tolerance.  The one thing I would recommend is to think of putting the money toward the loan not as a debt repayment, but as a fixed-income investment with a yield equal to your loan's interest rate.  If you would still consider buying it then, then go ahead.  If not, then stick with what you've got.  In my experience people get way too emotional about debt; try to take that emotion out of your decision making if you can. If you can afford to put money in your 401(k) account, I would say at least you should invest enough to get your employer's matching fund. It's free money, why not get it? "There are certain allowable reasons to withdraw money from a 401K.  The desire to free your money from a ""bad"" plan is not one of them.   A rollover is a special type of withdrawal that is only available after one leaves their current employer.  So as long as you stay with your current company, you cannot rollover.  [Exception: if you are over age  59.5] One option is to talk to HR, see if they can get a expansion of offerings.  You might have some suggestions for mutual funds that you would like to see.  The smaller the company the more likely you will have success here.  That being said, there is some research to support having few choices.  Too many choices intimidates people. It's quite popular to have ""target funds""  That is funds that target a certain retirement year.  Being that I will be 50 in 2016, I should invest in either a 2030 or 2035 fund.  These are a collection of funds that rebalances the investment as they age.  The closer one gets to retirement the more goes into bonds and less into stocks.   However, I think such rebalancing is not as smart as the experts say.  IMHO is almost always better off heavily invested in equity funds.  So this becomes a second option.  Invest in a Target fund that is meant for younger people.  In my case I would put into a 2060 or even 2065 target. As JoeTaxpayer pointed out, even in a plan that has high fees and poor choices one is often better off contributing up to the match.  Then one would go outside and contribute to an individual ROTH or IRA (income restrictions may apply), then back into the 401K until the desired amount is invested.   You could always move on to a different employer and ask some really good questions about their 401K.  Which leads me back to talking with HR.  With the current technology shortage, making a few tweaks to the 401K, is a very cheap way to make their employees happy. If you can score a 1099 contracting gig, you can do a SEP which allows up to a whopping 53K per year.  No match but with typically higher pay, sometimes overtime, and a high contribution limit you can easily make up for it." For such a small amount, I really don't think it's worth the time and effort to withdraw it. Why not roll it over into a traditional IRA or a new 401k / 403b? The math works out so that the 401k is still a better deal in the long term over a taxable account because of the tax-deferred growth. Let's assume you invest in an S&P 500 index fund in either a taxable investment account or a 401k and the difference in fees is .5%. I used an online calculator and a hypothetical 1k/year investment over 30 years with 4.5% tax-deferred growth vs 5% taxable and a 25% tax bracket. After 30 years the tax-deferred 401k account will have $67k and the taxable account will have $58k. The math isn't perfect -- I'm sure I'm missing some intricacies with dividends/capital gains distributions and that you'll then pay income tax on the 401k upon retirement as you drawn down, but it still seems pretty clear that the 401k will win in the long run, especially if you invest more than the 1k/year used in my example. But yeah, .84% expenses on an index fund is robbery. Can you bring that to the attention of the HR department? Maybe they'll want to look for a lower-fee provider and it's in their best interest too, if they also participate. The presence of the 401K option means that your ability to contribute to an IRA will be limited, it doesn't matter if you contribute to the 401K or not. Unless your company allows you to roll over 401K money into an IRA while you are still an employee, your money in the 401K will remain there. Many 401K programs offer not just stock mutual funds, but bond mutual funds, and international funds. Many also have target date funds. You will have to look at the paperwork for the funds to determine if any of them meet your definition of low expense. Because any money you have in those 401K funds is going to remain in the 401K, you still need to look at your options and make the best choice. Very few companies allow employees to invest in individual stocks, but some do. You can ask your employer to research other options for the 401K. The are contracting with a investment company to make the plan. They may be able to switch to a different package from the same company or may need to switch companies. How much it will cost them is unknown. You will have to understand when their current contract is up for renewal.  If you feel their current plan is poor, it may be making hiring new employees difficult, or ti may lead to some employees to leave in search of better options. It may also be a factor in the number of employees contributing and how much they contribute. First, to answer the question.  The benefit of a 401k is that you don't have to pay income tax on the money contributed nor do you pay capital gains tax on the money that accumulates.  You get that with the restriction that you can't willy nilly remove and contribute money to the account (and you are taxed on withdrawals, more severely if you do it before you are 65).  Similar sorts of restrictions apply to all retirement accounts which give tax benefits.  Now, for the 7000 not providing benefit.  Assuming a very modest 4% growth, over 40 years 7000 becomes 34,671. Not something to sneeze at (inflation, risk reward, blah, blah, blah, it is less than it looks, but 4% is really pretty low, the stock market averages anywhere from 7-&gt;10% and IIRC the bond market is somewhere around 5%).  Now, certainly, to avoid bankruptcy you should withdraw.  However, if it is possible, you will be best served by keeping the money in your 401k account.  The penalties and lost earning opportunities are pretty significant.  /u/BeatArmy99 [has the numbers](http://www.reddit.com/r/finance/comments/2ct0qy/why_cant_i_access_my_401k_if_its_my_money/cjiorl7) for how much you lose by doing an early withdraw.  Don't do this lightly and I would suggest avoiding cashing out the whole thing if you can. The expense fees are high, and unfortunate. I would stop short of calling it criminal, however.  What you are paying for with your expenses is the management of the holdings in the fund. The managers of the fund are actively, continuously watching the performance of the holdings, buying and selling inside the fund in an attempt to beat the stock market indexes. Whether or not this is worth the expenses is debatable, but it is indeed possible for a managed fund to beat an index.  Despite the relatively high expenses of these funds, the 401K is still likely your best investment vehicle for retirement. The money you put in is tax deductible immediately, your account grows tax deferred, and anything that your employer kicks in is free money.  Since, in the short term, you have little choice, don't lose a lot of sleep over it.  Just pick the best option you have, and occasionally suggest to your employer that you would appreciate different options in the future. If things don't change, and you have the option in the future to rollover into a cheaper IRA, feel free to take it. That expense ratio on the bank fund is criminally high. Use the Vanguard one, they have really low expenses. If there is  no match and you are disciplined enough to contribute without it coming directly out of your paycheck, dump the 401K.  The reason: Most 401K plans have huge hidden fees built into the investment prices. You won't see them directly, but 3% is not uncommon. 3% is a horrible drag on your investment performance. Get an IRA or Roth IRA and pick something with low fees.  Bonus: You will have a lot more investment choices! With painful 20/20 hindsight, I earnestly say - max it out hard.  The reason is the sheer opportunity of it.  As a young person you have time on your side - you have so many years for the earnings to compound!  It is many times more advantageous to max it out now, than fail to do so and be in your 40s trying to catch up.   Use the Roth 401K if your company supports that.  After that, max out a Roth IRA if your income is low enough to use them.  Otherwise, max out a traditional IRA (this will not be tax deductible because your income is too high), and the next day, convert it to Roth. That conversion will be tax-free since you already paid taxes on that money.  401K money is untouchable.  No one can ever take it from you - not with a lawsuit, not with bankruptcy.  As such, never give it up willingly by borrowing from it or cashing it out early, no matter how serious the problem seems in the short term. How do you invest a 401K when the market is so scary?  I found out when I became a Board member overseeing management of an endowment.  Turns out there's a professional gold standard for ultra-long-term, high growth, volatility-be-damned investing. Who knew? The S&P top 5 - 401(k) usually comply with the DOL's suggestion to offer at least three distinct investment options with substantially different risk/return objectives. Typically a short term bond fund. Short term is a year or less and it will rarely have a negative year. A large cap fund, often the S&P index. A balanced fund, offering a mix. Last, the company's stock. This is a great way to put all your eggs in one basket, and when the company goes under, you have no job and no savings.  My concern about your Microsoft remark is that you might not have the choice to manage you funds with such granularity. Will you get out of the S&P fund because you think this one stock or even one sector of the S&P is overvalued? And buy into what? The bond fund? If you have the skill to choose individual stocks, and the 401(k) doesn't offer a brokerage window (to trade on your own) then just invest your money outside the 401(k). But. If they offer a matching deposit, don't ignore that.