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Sounds simple enough, right?
Most people dont really understand how these crucial retirement plans work, which is alarming but very understandable.
Taxes Are Still an Issue
Singhs first talking point was about taxes.
Its a manner of deferring taxes, not avoiding them.
How and when you pay taxes depends on which throw in of account you have.
So let me start by talking about the traditional 401(k), Singh said.
The money then grows in your 401(k) for as long as your money is sitting there.
A Roth 401(k) is a whole different beast.
The money is taxed before it goes in, Singh said.
So now, only $700 goes into your 401(k).
Theres a Fee
A 401(k) isnt free.
Its charging you a fee.
This fee is called an expense ratio, Singh said.
To really understand 401(k) fees, it’s crucial that you know your expense ratio.
Ive seen people pay one and a half percent expense ratio, Singh said.
I want most of this money going into your pockets.
This is a complex concept.
Heres how Singh broke it down.
Every company is going to have different rules and regulations on this.
Because this could be a way to keep you at a company longer than you might like.
Bottom line: There are clear benefits to employer matches, but youre still working for that free money.
And theyre going to charge you a fee for every year that they manage your money.
Hes since softened on the matter, but what exactly are these limitations?
He continued, So if the stock market crashes, all refunds go down.
Maybe some will go down more than others, but you get hurt when the stock market goes down.
Thats not real diversification.
For real diversification, Singh advises looking beyond 401(k) plans when it comes to retirement planning.
you’re able to have multiple ways of investing.
Its not where you want to stop investing.
it’s possible for you to do this through a few alternatives.
What are other ways you’re free to invest in stocks?
Well, it’s possible for you to invest in stocks through something like an IRA.
Singh said you might also consider opening up a brokerage to invest in stocks.
By using different brokerages, you might invest in individual companies.
Or, you could also invest in startups or in real estate.
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