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You wrote, I started a new job nearly 2 months ago. I am in the same industry I've been in for 10 years, just switched to working for another company. I went from a company of 6 people to a company of about 25 people. My new employer does not match contributions to their 401k ("for now, might start later").

My question is, should I even bother enrolling in the 401k plan? I do not know what investment options are available to me, but if there's no matching funds, what's my incentive? Would a better alternative be to start a Roth IRA and pick whatever I want to invest in? Are there other options I should look into?

What should I do? I am 40 years old and have always put money into a retirement plan offered by my employer.

To answer this properly, we probably need to know a few more things. For instance:

1. Are there any cheap fund options in the plan?
2. Does the employer have you paying any of the plan expenses?
3. Are you able to contribute to a Roth IRA even if you don't contribute to the 401k?
4. How much do you need to contribute tax-deferred savings?
5. How long do you think you will be with this employer?

So I'm afraid there is more research you need to do if you want a useful opinion from the board.

I've personally never worked for the same employer for more than 8.5 years. My own assumption has generally been that I will change jobs before the cost of the retirement plan out-weighs the cost of not making pre-tax contributions. But this isn't a valid assumption for everyone. (And 8.5 years could be pushing the limits of what I would say is reasonable.)

Pre-tax contributions save you real money on your taxes today. At least they do if you're making a decent wage. It might happen to you, but most people are not likely to exceed the (current) 15% tax bracket in retirement. In other words, you are likely to be at least 1 bracket below your current tax bracket. Also that's the marginal rate. Some of that income will be taxed in the 0% and 10% brackets. That means you will see tax savings now and in the future that can offset a fairly significant amount in plan expenses.

But that assumption has been sorely tested by one of my employers in the past. For 4 years I contributed to a plan where the average fund cost was 2%/year. (When I made an issue of this problem, management's response was, "But didn't you make money in your 401k?") In that plan I stuck entirely with one index fund. The S&P 500 index fund had a fee of ~0.5%/year. But worse, the fine print showed that the plan was also drawing 0.25%/quarter of asset balances to cover plan expenses and sales commissions. That meant investing in the S&P 500 was costing me 1.5%/year. But it was the cheapest fund, so that's where all my money went.

Since the expenses are on-going for as long as you are employed there, it's important to have an idea how long you plan to stay if your 401k plan is like mine was. In my case, 1.5% was probably cost-prohibitive if I'd planned to set new tenure records. As it was the company folded after I'd been there for 4 years and I rolled the funds out immediately. But had I remained for 20 years, just squirreling money into my taxable accounts probably would have been a better choice because the funds would have eaten like 1/3rd of my potential asset values, which is far more than the tax savings would have been worth to me. But at 4 years, the loss was tolerable.

Anyway, that anecdotal information was just to illustrate why more information is needed. You just saying, "I started a new job and there is no company match for the 401k. Should I bother enrolling?" Doesn't provide much actionable information. I appreciate that you don't want to bother researching the available investment options. But if you don't know anything about them and what they will cost, how can you decide if it's worth enrolling?

I'm sorry, but I think you have some legwork to do.

- Joel
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