Should You Bother With Your Company's 401(k) if There's No Match Involved?

One of the benefits of working for an employer, as opposed to being self-employed, is getting access to different workplace benefits. These could include health insurance, paid time off, and access to a retirement plan.

In fact, it's pretty common for 401(k) plans to come with some sort of employer matching incentive. Vanguard, for example, recently found that 95% of companies offer some type of match for their retirement plans.

But gosh darn it -- what if you're part of that unlucky 5%? What if your company offers a 401(k), but there's no match to be had? Should you invest in that plan anyway, or should you find another home for your retirement savings? The answer is, it really depends on how happy you are -- or not -- with your 401(k)'s investment choices and fees.

When it pays to look outside a 401(k)

It pretty much always makes sense to contribute money to a 401(k) when there's an employer match involved. After all, how many opportunities in life do you have to get your hands on free money?

But when there's no match, it's a different story. From there, it could make sense to look outside of a 401(k) and find a plan that better meets your needs. To see if that's the case, you'll want to ask yourself two questions:

1. Am I satisfied with my 401(k)'s investment choices?
2. Am I losing a lot of money to fees?

One potential drawback of 401(k)s is that they don't allow you to invest in individual stocks like IRAs do. If you're a savvy investor, you may find yourself annoyed at being limited to choosing between different funds, like index and mutual funds. Also, some of the funds available in your 401(k) might come with high fees, called expense ratios, that eat away at your returns.

Then there are the administrative fees you pay just for having a 401(k). Those typically amount to about 1%, though they can range from 0.5% to 2%. If your 401(k)'s fees are on the high end of that range, you may want to look at saving for retirement elsewhere.

An IRA could be a good bet

If you're not exactly thrilled with your company's 401(k) and there's no contribution match to be had, then it could pay to see if an IRA is a better choice for you. With an IRA, you get the freedom to buy stocks individually, and you might be looking at much lower fees all in.

Anyone with earned income can open an IRA. And most major financial institutions offer these plans. So it could pay to explore your options if your company's 401(k) just isn't doing it for you and you want more control over your investments.

One final thing: It may be that your company does offer a match for its 401(k), but that it imposes a vesting schedule that doesn't work for you. With a vesting schedule, you don't fully own your employer matching dollars until a certain point.

Your employer might impose a three-year cliff vesting schedule where you must remain employed for 36 months or else you forfeit your entire match. If you know you only intend to stay at your job for a year, it means you're probably not getting your match either way. So in that situation, you may want to look at opening an IRA with a stock broker as well, since a match that isn't attainable isn't really any more helpful than having no match at all.