Depends on a number of factors including your tax rate and how long she'll be at this job.
There is actually a calculation you can run: https://www.bogleheads.org/wiki/401(k)#Expensive_or_mediocre_choices
If she plans to stay at this job for a while, consider campaigning for a better plan: https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401(k)_plan
Your question has been answered, but I just wanted to point out that you should make sure that if you choose to use a Traditional IRA, that your income is not too high to phase out of deductibility.
Income limits are fairly "low" for deductibility on that Traditional IRA.
And make sure to contribute *at least* the minimum to get the maximum employer match with the 401k.
> Are there any other alternatives?
Yes... a Roth IRA. Beware of income limits for that too.
By the way, presumably you're filing tax returns as MFJ. So it's not just *her* income that matters. It's *joint* income (specifically MAGI) that matters.
If you're above Roth IRA income limits, then we chat about Backdoor Roth strategy.
Since it sounds like you're not maxing all tax-advantaged space, minimum to match on hers and increase contributions to your accounts/her other accounts.
Or, if there's a decent fund in her plan but it's an allocation that would otherwise be a small portion of your overall portfolio, rearrange the rest of the portfolio around it.
Yep, my company has profit sharing and for years did not offer a 401(k). Finally, at employee behest, they did, but it was not a great 401(k) - few fund selections and high costs. After a number of employees went to our benefits manager and CFO to complain, the 401(k) was transferred to a different company with 10x the fund selections and much lower fees. You can lean on your benefits manager to make changes.
Are you sure that the 401k plan does not offer a "self-directed" investing option? Who is the fund administrator? If it's one of the big brokerages (Schwab, etc) even if it has a white-label management company on the front-end, often this is an option that's just hidden / you have to look for it.
The tax savings and match are still worth it. I’d save in the best you can find, to the match. Then do Roth or backdoor Roth for the rest.
Plenty of people would find your strategy too risky. Hers can be safer to balance it.
The main issue with high fee funds in a 401k is compounding. If you will only be at this job for a few years, you just rollover the 401k when you leave. If you will be there for more years, you lobby like crazy for better fund choices or a better 401k.
Those are large and unnecessary. But get the match and suck it up even if the funds aren't optimal. Maybe an opportunity to diversify in there with some small cap or intl exposure.
Depends on a number of factors including your tax rate and how long she'll be at this job. There is actually a calculation you can run: https://www.bogleheads.org/wiki/401(k)#Expensive_or_mediocre_choices If she plans to stay at this job for a while, consider campaigning for a better plan: https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401(k)_plan
Your question has been answered, but I just wanted to point out that you should make sure that if you choose to use a Traditional IRA, that your income is not too high to phase out of deductibility. Income limits are fairly "low" for deductibility on that Traditional IRA. And make sure to contribute *at least* the minimum to get the maximum employer match with the 401k.
Yikes. I didn’t even consider that. She’s over the income limit for deductibility. Are there any other alternatives?
> Are there any other alternatives? Yes... a Roth IRA. Beware of income limits for that too. By the way, presumably you're filing tax returns as MFJ. So it's not just *her* income that matters. It's *joint* income (specifically MAGI) that matters. If you're above Roth IRA income limits, then we chat about Backdoor Roth strategy.
What is too high to choose traditional IRA and why?
Refer to the IRS website. * https://www.irs.gov/retirement-plans/ira-deduction-limits Click the link to the table that applies to you.
Since it sounds like you're not maxing all tax-advantaged space, minimum to match on hers and increase contributions to your accounts/her other accounts. Or, if there's a decent fund in her plan but it's an allocation that would otherwise be a small portion of your overall portfolio, rearrange the rest of the portfolio around it.
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Yep, my company has profit sharing and for years did not offer a 401(k). Finally, at employee behest, they did, but it was not a great 401(k) - few fund selections and high costs. After a number of employees went to our benefits manager and CFO to complain, the 401(k) was transferred to a different company with 10x the fund selections and much lower fees. You can lean on your benefits manager to make changes.
Are you sure that the 401k plan does not offer a "self-directed" investing option? Who is the fund administrator? If it's one of the big brokerages (Schwab, etc) even if it has a white-label management company on the front-end, often this is an option that's just hidden / you have to look for it.
The tax savings and match are still worth it. I’d save in the best you can find, to the match. Then do Roth or backdoor Roth for the rest. Plenty of people would find your strategy too risky. Hers can be safer to balance it.
The main issue with high fee funds in a 401k is compounding. If you will only be at this job for a few years, you just rollover the 401k when you leave. If you will be there for more years, you lobby like crazy for better fund choices or a better 401k.
Those are large and unnecessary. But get the match and suck it up even if the funds aren't optimal. Maybe an opportunity to diversify in there with some small cap or intl exposure.