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My employer-provided 401k has very limited investment options. Mostly I see two options:

(1) They have several target-date funds like this: LifePath® Index 2040 Non-Lendable Fund M which supposedly rebalances itself over the course of the time and becomes more conservative and starts investing in bonds etc. But as of, for now, it is investing heavily into Russell 2000 and Russell 1000. Which is not doing so great.

(2) It has some weird funds like this: State St S&P 500 Indx NL Cl K or Dodge & Cox balanced fund. I don't think these are exchange-traded funds. I cannot find them in Robinhood or my usual brokerage account. I am guessing the later fund is a mutual fund or something?

Is there a way to transfer my funds periodically(or directly have my employer send my 401k contribution along with the company match) to a Charles Schwab traditional IRA or some other account where I have a little bit more control over my money and I can invest in instruments that I am familiar with? I primarily want to invest in three instruments(QQQ, VOO, AGG).

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  • "State St S&P 500 Indx NL Cl K" isn't so weird. It's the S&P 500 index fund managed by the same company that manages SPY. It will probably give you almost identical returns to VOO. – Tanner Swett Jul 23 '20 at 3:01
  • Well, the part that I find weird about that particular fund, is the "Class K" at the end of the name. Maybe it doesn't mean anything significant, but to be absolutely sure, I would have to spend an hour searching on Google or reading through some prospectus. – Aditya Jul 23 '20 at 3:34
  • Honestly you'll have to read the prospectus to know what the "Class K" variant is. From my understanding it is typically different loads/administrative fees than the "regular" one you would match against in Morningstar. Same principle as the similar but a bit different TV model numbers in retail stores to obfuscate comparisons. – Morrison Chang Jul 23 '20 at 3:48
  • You should read the fine print, but mutual fund Class K shares are often desirable, some sort of Institutional Class with lower expenses charged than other classes, but requiring huge (1MM+) minimum amounts that are reached by pooling the accounts from the various employees. – Andrew Lazarus Jul 23 '20 at 19:17
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You will have to ask your plan if you can do an "in-service" rollover to an outside account.

Generally, in my experience, no, you can't do a rollover transfer to an outside account. The only time you can move money out is either to take a plan supported loan (but you still have to pay it back with interest), or end your relationship with the company.

One interesting story is that a company I worked for was acquired which meant that the old company ceased to be. I rolled over the old 401k into a retirement brokerage account relatively easily (still took weeks), but my coworkers who signed off on rolling the old 401k balance into the new 401k took even longer.

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From a comment on the question:

Well, the part that I find weird about that particular fund, is the "Class K" at the end of the name. Maybe it doesn't mean anything significant, but to be absolutely sure, I would have to spend an hour searching on Google or reading through some prospectus.

The website for the 401(k) should have everything you need to review the handful of funds. The target-date funds should even all be in one document.

Target-date funds appeal to many employees, they know that they can over the decades just pile money into the fund, and it will make the risk adjustments automatically. Many people also see these types of investment option if they have an education 529 plan.

The K class type fund is a sign that this fund is only available through 401(k) and 401(k) like plans. That means you might not be able to see the daily price changes through the standard external sources. You will not be able to buy them except through a retirement plan. They tend to be twins of their more public classes.

Is there a way to transfer my funds periodically(or directly have my employer send my 401k contribution along with the company match) to a Charles Schwab traditional IRA or some other account where I have a little bit more control over my money and I can invest in instruments that I am familiar with? I primarily want to invest in three instruments(QQQ, VOO, AGG).

Very few companies allow in-service rollovers. Some do. You can also find some companies that do allow an employee with a significant balance to be able to use a specific broker to either buy mutual funds, or to buy individual stock, with the 401(k) money. But I suspect this is rare.

You do have options:

  • If the company match is zero, just skip the 401(k). Though you will be limited to the smaller maximums of the IRA.
  • Invest in the 401(k) only enough to maximize the match. Put additional funds into a IRA. Note that you participation by you or your spouse in a 401(k) can change the participation and deductiblity of IRA contributions.
  • Embrace the 401(k). Use the higher limits. Know that when you leave the company you can move all the funds into a IRA, or even roll it over into the new 401(k).

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