There are many good reasons to save for retirement in a 401(k). Not only is contributing through an employer a seamless process, but 401(k)s offer much higher annual contribution limits than IRAs. Currently, workers under age 50 can put up to $18,000 a year into a 401(k), while those aged 50 and over can contribute up to $24,000 a year. With an IRA, these limits are only $5,500 and $6,500, respectively.

Still, a large number of workers who are eligible to fund a 401(k) choose not to do so. Of the 79% of Americans who work for employers that sponsor retirement plans, only 41% opt to participate. And while much of that boils down to poor budgeting, excessive spending, and misplaced financial priorities, we can't discount the fact that some workers might be shunning their 401(k)s because their plans are downright lousy.

Piggy bank next to the words "401l" on a chalkboard


So how can you tell if your 401(k) is crummy? Here are three warning signs to look out for.

1. A narrow range of investment options

One advantage IRAs tend to have over 401(k)s is that they give you the ability to choose from a wide range of investments. But while the typical 401(k) only offers about two dozen choices, there's still an opportunity to snag some low-cost investments -- if your plan provides them. On the other hand, if your 401(k) offers very little in the way of index funds, which are an inexpensive way to get a piece of the stock market action, then you may be stuck with high-fee mutual funds.

2. Too many proprietary funds

Even if your 401(k) offers a decent investment selection, pay attention to the extent to which your plan pushes its own proprietary funds, which are those managed by your 401(k) provider. Conflicts of interest aside, these plans may not be best suited to help you meet your financial objectives -- after all, of the thousands of funds out there, what makes your 401(k) provider's offerings the best? Proprietary funds are also not known to be the cheapest. If proprietary funds account for most of your choices, then you plan likely isn't the best.

3. No employer match

Not every company offers a 401(k), but among those that do, a good 92% are willing to match employee contributions to some degree. So if your plan doesn't include a matching incentive, it means you're getting shortchanged. The typical employer match equals 2.7% of pay, so if your salary is $60,000, that's an additional $1,620 a year you could be snagging. Not only that, but when you lose out on a match, you also miss out on the compound interest that extra money could've earned. For example, if you were to invest $1,620 a year at an average annual 7% return, over 20 years, you'd have an extra $66,000 in your account. And that's not a loss to take lightly.

What to do when your plan categorically stinks

Maybe by now you've come to realize that your 401(k) leaves much to be desired. The question is: What can you do about it?

For one thing, you can fight for a better one. Rally some coworkers and talk to your employer about offering a match or switching providers. Another option? Try working for a larger company. Though this isn't always the case, a business that employs thousands of workers might offer a superior plan.

You can also consider moving some or all of your retirement funds into an IRA, where you'll get a significantly wider range of investment choices that can help keep your fees to a minimum. If you're currently contributing, say, $500 a month to your 401(k), and you're under 50, you might try maxing out an IRA and keeping that remaining $500 where it is.

Finally, remember that while having a lousy 401(k) is not ideal, it's better than having no 401(k) at all. Without a workplace plan, you'll be limited to a $5,500 annual contribution ($6,500 if you're 50 or older) if you're looking to save in a tax-advantaged fashion, which you should be. So if you are stuck with a bad plan in some capacity, stay vigilant and try to make the best of it.

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