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I know that a low expense ratio is preferred. But what if the expense ratio is above the threshold limit (e.g 1.20%+), do you still invest in a 401K or not bother at all?

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Does your employer offer a 401(k) match? If so, contribute enough to maximize that--it's free money. After that, contribute to an IRA where you can invest in funds with low expenses. After you max that out, if you still have money left over, max out your 401(k) despite the high expenses for the tax advantages. Remember when you leave the company you can roll over the balance into an IRA and switch to lower-cost investments.

Of course this is general advice without knowing your situation. If you're looking to buy a home soon, for example, you might want to keep extra money in a taxable account for a downpayment rather than maxing out your 401(k).

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