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Is Your 401(k) Up to the Task?

By Frank Armstrong, III

A 401(k) may be the largest financial asset a family has. It can be a great tool to build wealth, or, depending on its structure, so defective it may not be worth your participation. 401(k)s range anywhere from excellent to awful. Unfortunately, it's up to your firm as a plan sponsor, and then you as an individual, to decide whether to select one plan over another, and then whether to personally maximize the opportunity that's presented or to pass and find better alternative ways to invest your retirement savings.

It's important to keep in mind that 401(k) plans are investment vehicles, and they should be judged accordingly. While there are some significant tax advantages built in, depending on the 401(k), those advantages can be quickly neutralized by excessive costs, poor performing funds, and insufficient opportunities to allow you to diversify and manage risk. They are definitely not all alike, and sponsors as well as participants should educate themselves on how they differ so they can make informed choices when it comes to selecting a plan.

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