Why you shouldn't just rely on a 401(k) for retirement

April 9, 2021

A 401(k) retirement plan is an excellent tool to help employees save for retirement. Many employers offer a company match, which is basically extra compensation. Not only that, but you also usually get a tax break for your contributions in the year you make them.

But if you're only saving for retirement in a 401(k), it could end up hurting you when you're ready to start living on your savings. Here are five drawbacks of only using a 401(k) for retirement.

1. Fees

The biggest drawback of a 401(k) plan is they usually come with at least some fees. There are plan administration fees, investment fees, and service fees, among others. 

If you work for a small company, the fees are worse. Since there are fewer participants and fewer assets to spread the fees across, participants in small-business retirement plans can get hit with fees as high as 2%. Most large 401(k) plans -- those with greater than $100 million in assets -- can get their fees down below 1% with the largest below 0.5%.