For this episode of Motley Fool Answers, Robert Brokamp and Alison Southwick do a deep dive into perhaps the most popular form of retirement account in America: the 401(k). Between that and similar defined-contribution plans, we were holding $7.7 trillion at the end of 2017 -- a remarkable sum, and yet most people still aren't saving enough. But our contributions are only one piece of the puzzle. The other big one is return on investment, and in this area, there's wide divergence.

If you've got a good one, you can probably skip this segment, but if not, the Fools talk about your best options if you discover your 401(k) is riddled with fees, thick with bad fund options, or otherwise built to underperform.

A full transcript follows the video.

This video was recorded on May 22, 2018.

Robert Brokamp: Now, what to do if your 401(k) is not A-OK. Some standard advice is to take advantage of the match, contribute up to that point, and then move money to an IRA. I think that's good advice, but it is important to realize a couple of things. In the vast majority of plans, the match does not vest immediately. In other words, it doesn't become yours immediately. You have to work there for a certain number of years. It might be you have to work there for three years and then you're automatically invested. It might be [which is more typical], you have to work there for five years and it gradually vests.

However, the average person stays at a company for just four years, so if you don't think you're going to be staying with that company long enough for the match to vest, it may not be worth contributing to a bad 401(k) just to get a match because you're going to leave anyhow. But if you're going to be there and it's a good match, go ahead and stay.

By the way, the average match is 3%. Generally, it's 50 cents on the dollar up to 6%. But as I think I've mentioned in previous episodes, at Vanguard they have more than 200 different matching formulas, so matches are all over the place. But if you're getting a match of 3%, you're getting about average. If you're getting a match higher than that, you actually have an above-average plan.

The other reason why you would contribute to the 401(k) and then go to an IRA [ideally a Roth IRA] is because it may be the only way you can get a Roth. At this point about 65% of plans offer a Roth option, but a lot don't, and for many people the Roth is the way to go, especially with tax rates being historically low right now. So, if you think of the Roth as best for you, that might be another reason why you would just put a certain amount in your 401(k), but then max out a Roth IRA.

Another thing to do with your plan is even if you have a very mediocre plan, chances are you might have one or two good funds. Just choose those funds in those asset classes, and then use your other accounts for the other asset classes. Generally speaking that means most funds have at least an S&P 500 index fund. If you have a bad plan with bad options other than that, just choose that. Use that for your U.S. large-cap allocation, but then use other accounts for international, small-cap, real estate, and whatever else you want to put into your portfolio.

A minority of plans do offer the brokerage option, which allows you to buy individual stocks as well as probably choose from thousands of other mutual funds and ETFs. That's also something to consider if the mutual funds in your plan are not very good. The problem with that is that many of these side brokerages within 401(k)s are more expensive than a traditional brokerage, so either the commissions on the trades are higher, or you have to pay an asset management fee underneath that.

Even at The Motley Fool we have to do that with the side brokerage in our 401(k). We have to pay a certain amount on top of the trade. So, it's a good alternative if that's your only choice, but it's still not a better deal than just opening a discount broker somewhere else.

The other thing to do, of course, is to advocate for a better plan. Bring all these facts up to the people who offer the plan at your office. Chances are they also are participating in the plan, so they have an incentive to do a better job. Don't go in there with guns blazing. Go in there with some research. BrightScope is a great resource as is the Investment Company Institute in terms of research on how much the average 401(k) costs. It's great to just bring in some facts and say, "Hey, this is what the average is. We're paying more. Is there a way to get a better deal?"

Lastly, another possibility is to transfer the money to an IRA. Generally speaking, once you're in a plan, you have to stay in a plan, but for some plans you can do something called an in-service distribution. The plan has to allow that and generally you have to be 59 and a half; but if you are still working, you can move some of the money out of the plan to an IRA and get some lower costs and better investment options.

Then, of course, there's always money with old plans. If you have any money in a 401(k) or 403(b) or 457 with an old employer, you can always roll that money out of that plan either into an IRA or into your current plan if it's a good one.

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