401k with super high fees.... worth it???

[TheAnonOne]

Hello,

I currently have a 401k with my company, I get NO MATCH, and I maxed it last, and this year. (For a total of about 35.5k)

The plan is with principal financial, and offers about 20 funds.

The LOWEST fee is a *S/P 600 Fund* of 1.66% and pretty-much every other fee is 2.5%


My allocation is 60% the S/P fund and 5% into 8 other funds for no particular reason.


I currently earn somewhere in the 170-200k range so my bracket is pretty high in both federal and state rates(MN)

Am I screwed? Is the plan even worth it?

Thanks!

PS. I invest money outside of this in low cost index funds, so it's not all bad!

[seattlecyclone]

In a high tax bracket you're generally better off maxing the 401(k) even with ridiculous fees such as yours has. This is especially true if you plan to switch jobs within the next few years, which will give you an opportunity to roll the account into a Vanguard IRA.

[MDM]

To quantify "bad 401k fees vs. taxable", consider using the "401k vs Taxable" tab on the case study spreadsheet. 

There is a "rule of thumb" in the Bogleheads' 401k wiki entry: ''consider investing in a taxable account if the product of the extra costs and the number of years you will stay in the plan exceeds 30%."  Unfortunately the conditions under which that rule is appropriate aren't given, so caveat user. 

The Bogleheads wiki also links to http://thefinancebuff.com/alternatives-to-a-high-cost-401k-or-403b-plan.html, from which one can access an online evaluation tool.  The linked article was written in 2008, when things such as backdoor Roths weren't in use.  The online evaluation tool doesn't allow one to see calculation details, but it and the case study spreadsheet match exactly for traditional 401k and taxable account calculations over a variety of inputs.  Ease of use is in the eye of the beholder, so use whatever is easiest for you.