As a relatively new worker, is it better for me to go with my employer's investment plan, or to invest for retirement myself?

Asked by yancy

3 Answers

Log in or sign up with email
By submitting you agree to our Terms of Service
Answered by Pamela J. Horack, , CFP®PRO+ in Lake Wylie, SC
Hi Yancy! It pays to take a look at what your employer plan offers. On the plus side, the money comes out of your paycheck automatically, so it's super easy. You can contribute up to $18K which is more than you can contribute to a regular IRA or Roth IRA. And your employer may match your contribution, boosting your overall savings. On the downside, you have fewer choices of investments and no control over the cost of those investments. Overall, I'm a fan of employer plans. Have a fee-only planner take a look at yours if you still have questions. | 01.17.15 @ 15:59
Comment
Log in or sign up with email
By submitting you agree to our Terms of Service
$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 14:30
Answered by Kate Holmes , CFP®PRO+ in Las Vegas, NV
Hi Yancy. I agree with Pam. The first thing to look as is whether your employer offers a match on your contributions. Then take a look at the vesting schedule to see how long you need remain employed for that matching contribution to be yours to take with you. To encourage employee loyalty, companies sometimes require you to work there for a few years before THEIR contributions are 100% yours (your own contributions are always yours). If they have a long vesting schedule and you don't think you'll remain with that employer that long, the match may not be worth it.

Next, look at the underlying expense of each fund option. You can enter the Ticker Symbol (or search based on the fund name) at Morningstar.com. Towards the upper right it will tell you the fund expense and whether that's high, low, average, etc. If most of the funds have high expenses, you can do better on your own through an online discount broker like Charles Schwab, TD Ameritrade, Vanguard, Betterment, etc.

Usually in life the more we pay for things the better the quality, but that's not the case with investing. You want to keep your expenses as low as possible since those expenses eat into your returns and can have a big impact over many decades. You'd rather have that money working for you and growing than going towards unnecessary fees.

Keep in mind, good company retirement plans have very low fees and good investment options. You can think about it like shopping at Costco or Sam's Club -- being part of a larger group gives you access to funds you couldn't use on your own, and for a lower cost. | 01.17.15 @ 20:15
Comment
Log in or sign up with email
By submitting you agree to our Terms of Service
$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 14:30
Answered by Larry Gilmore, Insurance Agent in Marysville, WA
First and foremost, does your employer "match" any contributions you make? If so, that is a strong case to go with your employer's plan up to the match limits at least. Another aspect is are you a disciplined saver? Payroll deductions work for some because the money is invested before they get their checks and that helps them as it is done before they get their hands on it.

Generally, as an employee the opportunity to save more money is with your employers plans, but if you quality a Roth may be a good option too. | 06.29.16 @ 00:43
Comment
Log in or sign up with email
By submitting you agree to our Terms of Service
$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 14:30
Log in or sign up with email
By submitting you agree to our Terms of Service
Free MoneyTips Membership!

Get FREE, full access to MoneyTips.com

Answered by

Related Questions