Should You Fund Your 401(k) Beyond Your Employer Match? Key Questions to Help You Decide

Should You Fund Your 401(k) Beyond Your Employer Match?

It always pays to get free money in your 401(k). But where do you go from there? One of the best perks of being a salaried worker, as opposed to being self-employed, is getting access to employee benefits. Depending on your company, these could include subsidized health insurance, paid time off, and access to a retirement plan.

Am I happy with my plan's investment choices?

One drawback of 401(k)s is that they commonly limit you to a number of funds to put your money into, as opposed to letting you invest in individual stocks. That could make it difficult to build a portfolio that meets your needs and matches your risk tolerance. It could also mean facing hefty investment fees, depending on the specific funds you choose.

• Result: Assess the investment choices offered by your 401(k) to determine if additional contributions are beneficial.

Am I looking to spend a lot of time choosing stocks for my portfolio?

It's one thing to only fund your 401(k) up to your match and then contribute to an IRA if your intent is to hand-pick stocks for your retirement portfolio. But if you know off the bat that you're not willing to do that work, then you may be better served keeping all of your savings in your 401(k) -- especially if that plan offers a low-cost index fund you can fall back on.

1. Tip: Consider the time commitment required for stock selection when deciding on retirement savings allocation.

What fees does my plan charge?

In addition to the investment fees you might face in a 401(k), you'll also have to deal with administrative fees. You'll frequently find 401(k) fees in the vicinity of 1%. But if your plan's fees are higher, that's reason enough to only fund your 401(k) up to your match and then put your remaining savings into an IRA.

• Insight: Evaluate the fees associated with your 401(k) plan to optimize cost-efficient savings strategy.