This is similar to this question (I can't comment yet so that's why I'm making this new question. The OP didn't mention anything about not having matching etc..): Still invest in 401K with a high expense ratio?

What if the expense ratio is more than 1.0%+ and the company doesn't have matching? This is just for a plain old 401k retirement.

  • 1
    The advice in the other thread still applies here. One essential factor is how long you estimate you'll work there. Personally I've never worked anywhere longer than 4 years. So even when I do encounter a mediocre to bad 401(k), on average I'll pay an extra 2.5% fee (4% on the first year's money, 3% on the second, etc) to deduct 25% from my taxes. After that I'll leave the company and roll it over. A place that has that bad of a 401k, and refuses to change it when it's pointed, is probably not a good place to work long term anyways.
    – stannius
    Apr 2 '15 at 22:28

Two thoughts:

  1. You can always speak with HR about adding investments. There's no guarantee they will do anything, but I've done this twice, suggesting a few mutual funds that were better than what my company at the time offered.

  2. Part of the benefit of 401(k)s is that you put money aside for retirement that grows tax free, and if you leave the company, you can roll it over into an IRA, which at that point, you can re-allocate how you want your resources. You can always have you own IRA in addition to what your employer offers and roll it into that. I don't know your specific situation, but take the below example of something you could do:

Tiffany doesn't like her company 401(k) investment choices, but she sets aside $10,000 each year, for three years before leaving to a new company. After leaving, she rolls over her $45,000 (the $30,000 grew some) into a traditional IRA and makes an investment selection she finds more attractive that matches her own selection for her already existing IRA. Her $45,000 she rolled into her IRA will continue to grow tax free, like it did with her employer, but with an investment selection she finds more attractive.


The most important first step is to decide how much you want to invest. This decision should be independent of what investment vehicles are available to you and more tied to what your savings goals are and how long you have until you need the money.

For the sake of discussion, let's say this amount is $15K per year.

You'll want to take advantage of the tax-advantaged accounts like the 401k or a Roth IRA because of the long term benefits.

Very common advice for which retirement accounts to fund looks like this: Invest money in these categories until you run out of money.

  1. 401k Up to Match
  2. Roth IRA up to Yearly Maximum
  3. 401k Up to Yearly Maximum.
  4. Taxable investments

If you followed this advice, you would invest $0 in 401k up to the match because you don't have a match. You would invest in a Roth IRA up to $5500 (yearly max) and then into your 401k an additional $9500 ($15K - Roth contribution)

This approach gives you a blend of pre-tax (401k) and post-tax (roth) investments.

If you are in a higher tax bracket now, it may make more sense to invest like this:

  1. 401k Up to Yearly Maximum
  2. Roth IRA up to Yearly Maximum
  3. Taxable investments

In which case you'd invest $15K in the 401k and call it good because you never got out of investment category 1.


First max out your IRA (roth might be better in this case, since you can effectively put more in), then invest in your 401(k).

  • This question doesn't have anything to do with an IRA or the order of account-types in which to invest. It's a question about whether it makes sense, at all, to invest in a 401k that has high expenses and no matching. Aug 18 '16 at 5:38
  • And the answer is yes - it makes sense to invest in a 401k with high expenses and no matching after you've exhausted other pre-tax options. Sorry that wasn't clear enough to understand.
    – David Rice
    Aug 19 '16 at 16:11

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