If your employer offers a 401K, but you do not like their investment options and fees, what are your alternatives?

I know there are Traditional and Roth IRAs. But if your income is too high to contribute to those IRAs are there any other options or are you stuck with the 401K?

--Some Clarification---

This is more of a hypothetical question. From my understanding a 401K can have fees of around 1% of your portfolio. And you might have a three year vesting schedule on your employer match.

So if you are in an industry with a high turnover rate, so you don't expect to become vested in a match, and the 401K has higher fees in comparison to some low cost robo-advisors(that invest in ETFs) like Wealthfront or Betterment. In that kind of circumstance is there an alternative?

I am aware of these other types of accounts like IRAs and HSAs, but none of them seem to allow you to contribute as much as the 401K.

  • Can you elaborate on your issue with the investment options within the employer 401K?
    – quid
    Apr 17, 2018 at 17:56
  • have you looked into mutual funds?
    – depperm
    Apr 17, 2018 at 18:03
  • Does your employer offer a match? You're not going to find anything else that gives you that 100% return.
    – D Stanley
    Apr 17, 2018 at 18:07
  • Married? Children? HSA? Apr 17, 2018 at 18:14
  • 2
    Related: When is employer 401(k) match not worth it?
    – Ben Miller
    Apr 17, 2018 at 18:19

5 Answers 5


This question is very similar to this one, although the circumstances are a bit different. There is not a lot you can do.

The first thing I would look at is a back door ROTH. However, you will likely be limited to a small amount in relation to your income.

Secondly, you can always contribute to a taxable account. Using low turn over funds, like a S&P index fund will behave somewhat like a tax differed account, as they tend to minimize distributions.


I have never heard of a 401k plan with investment options and/or fees that were so bad that this counteracted the benefits of having a 401k, especially if the employer has any kind of matching. I'm not saying it's impossible that this could happen, but I'd be surprised an employer would do that to their employees when so many good options are available to companies.

As for an IRA, if you could only afford to contribute up to $5500 total, then perhaps you would prefer to use an IRA over the 401k, but if your income is high enough that you aren't eligible to take advantage of the Roth IRA or the tax deduction on the Traditional IRA, then you're probably in a situation where you would want to contribute more than just $5500, making the 401k attractive despite potentially poor investment options and fees.

As for other tax advantaged options, if you have an HSA compatible health plan, you could max out your HSA and not spend it, and then invest it like you would an IRA. You could also contribute after tax funds to a Traditional IRA and backdoor it to a Roth, but this is still maxed at 5500 per year.

  • My wife worked for a health care staffing company that offered a 401(k) plan with no match and with a 1.35% extra fee (all the investments were "wraps" around public mutual funds). The money market account had a negative net interest rate. I advised her not to participate in it. I honestly don't know why they bothered offering it.
    – stannius
    Feb 14, 2019 at 20:16

If your employer offers a match, contribute as much as they will match and don't worry about the fees. The 100% return will more than make up for the fees or performance. If your employer's fees are 1% higher and the investments perform 2% lower than other similar funds, then you've still got a 97% higher return (relative to your contribution amount) compared to other funds. You're not going to get that in any other vehicle.

If/when you leave, you can roll the 401(k) into a traditional IRA and choose the investments yourself.

If there is no match, other tax-advantaged alternatives are IRAs like you mention, and HSA contributions IF your employer offers a high-deductible medical plan (some employers will even match contributions into an HSA as well). 529 might also be beneficial if you have children that will attend college someday. From there you're looking an non-tax-advantaged vehicles like an individual investment account,


I'm going to be blunt regarding your edit. This kind of hypothetical is an utter waste of time.

ALL mutual funds have some kind of expense ratio whether they're held in an employer 401(k), Traditional IRA, ROTH IRA, 529, vanilla taxable brokerage account, etc.

IF your employer plan only has fund options that charge a load or have exorbitant fees, then sure, lets look at the fees and see what alternatives may be available to you and what the pro/cons look like to determine a strategy. But "what if I don't like my employer plan" with no qualification as to why is a fishing expedition where the only answer is all other available options that would allow you to buy investments; and in all of these options the mutual funds will have expense ratios too.

  • I'm going to be blunt regrading your answer. Your answer is an utter waste of time. The question is simply about understanding what investment alternatives exist, not choosing one. Yes, expense ratios exist, but not all are equal. The purpose of the edit is to give possible context that an investor might take into consideration. If understanding what options exist and what an investor should consider is a "fishing expedition" then guilty as charged.
    – Nelson
    Apr 17, 2018 at 19:22

I know there are Traditional and Roth IRAs. But if your income is too high to contribute to those IRAs

There is never income limit for contributing to a Traditional IRA. You might be talking about the income limit for deducting a Traditional IRA contribution if you and/or your spouse was "covered" by an employer retirement plan that year.

However, if neither you nor your employer contributes to your 401(k) during the year, you are not considered "covered" by an employer plan. If neither you nor your spouse (if you are married) are covered by an employer plan that year, there is no income limit for deducting your Traditional IRAs, so you can make deductible Traditional IRA contributions instead of contributing to your 401(k), though the IRA annual contribution limits are much lower than that for 401(k)s.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .