Your 401(k) Plan: 3 Ways to Tell If It's Any Good

401(k) plans are often criticized, but how do you know if your plan is bad or good? Find out here.

Mar 9, 2014 at 10:06AM

You may have noticed that 401(k) plans have been under fire lately, with many companies offering subpar investment choices that their employees must choose from. But how can you tell if your 401(k) plan is worth participating in?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at three ways you can assess your 401(k) plan to figure out whether it can be a key part of your retirement strategy. First, Dan recommends looking at every single investment option the plan offers, dividing them into categories based on whether they emphasize stocks, bonds, or other investments. Then, Dan suggests looking at the costs of each option, sticking with low-cost index-tracking choices where possible. Although most 401(k) plans don't yet have access to the low-cost exchange-traded funds SPDR S&P 500 (NYSEMKT:SPY) or Vanguard Total Stock (NYSEMKT:VTI), similar index mutual funds have many of the same features and can give you the same advantages. Finally, Dan points to the need to choose an appropriate asset allocation from among the best choices in each category, dividing your money in line with your risk tolerance and time horizon.

What to do beyond your 401(k)
Regardless of how good your 401(k) is, you'll want to have outside investment assets to take maximum advantage of key opportunities. Even though the chance to get wealthy from a single investment doesn't come around often, it does happen sometimes, and our chief technology officer believes he's found such an investment. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but also your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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