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The Short Answer

Is Your Company Retirement Plan Up to Snuff?

Six key questions to ask before maxing out your 401(k).

One of the occupational hazards of being a Morningstar analyst is that friends and family members are constantly seeking my opinion on various investments. Whether it's an elderly relative asking what I think about a certain high-yielding investment (Answer: Quit chasing yield and focus on total return.) or a friend of a friend wondering whether she should hang on to  Oakmark Fund (OAKMX) despite its recent malaise (Answer: Yes.), people don't seem to hesitate to come to me with questions.

One of the most frequent questions, by far, is: Can you help me allocate my 401(k)? Along the way, I've seen scores of company plans, ranging from thoughtfully constructed lineups chock-full of superb choices to plans that made me wonder, "What on earth were they (the plan administrators) thinking?"

The broad disparity in quality among retirement plans argues for carefully scrutinizing your company plan before allocating valuable resources to it. True, it's hard to beat the tax-deferred compounding that a 401(k) plan affords. But if you have a fixed pool of investment dollars, it's probably wise to consider investing in an IRA (particularly a Roth IRA), over which you exert more control, before maxing out on a lousy company plan.