401(k) Investments: Should You Invest in a 401(k)?

Daniel Penzing
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We take a look at the benefits of investing in employer-sponsored plan.

So far, we’ve been talking about retirement programs that are meant to supplement your employer-sponsored plan that’s commonly known as a 401(k). For most people, the 401(k) is the cornerstone of all retirement programs. In this lesson, we’ll talk about whether you should invest in a 401(k).

Some 401(k) plans have higher fees than others. If you can choose among different levels of fees on 401(k) plans, the lower-fee one will usually outperform the higher-fee one.

So if there is a choice, you should invest your maximum in a 401(k) plan with lower fees. The fees will add up over time, so the savings will add up over time, too.

Since the 401(k) plan is meant for your retirement, you should definitely think of investing the maximum. The US Department of Labor and the IRS even require that you contribute the maximum. However, if you’re young and broke, you might not be in a position to do so.

But the benefit of the maximum 401(k) contribution is that it compels you to regularly save for your retirement. This is one of the best benefits of investing in a 401(k).

What is 401(k)?

A 401(k) plan is a retirement