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Comment by nostrademons | Hacker News Reader

My 401k is an index fund. Or a couple of them, rather.

I dunno what other people's 401k plans look like, but I've got about as much flexibility to invest as I do with my Roth IRA, and pay less in fees. A lot of that's because I knew more about finance when I set up the 401k, so I was already on the index-fund bandwagon and didn't pick it because, say, my dad had an account at the same firm.

Fund selection and account type are mostly orthogonal. The reason to decide between a 401k, IRA, Roth IRA, or individual account are tax and withdrawal considerations, not investment decisions. Then you make investment decisions within the account based on where you want your money to go.

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Withdrawal options are interesting. I always get conflicting information (from financial advisors no less!) about the options for early withdrawal from a Roth IRA. I think I'm finally comfortable (after confirming specifically with my Roth IRA provider) saying that you can withdrawal from your Roth IRA as long as it's only capital invested, and not money earned on that investment.

As spammy of a title as it is, Ramit Sethi's "I will Teach you to be Rich" book is a great no-bullshit look at understanding your personal finances.

That's my understanding too, for the Roth IRA.

So you are correct about the original contribution thing. There is also an option to start early withdraws on investment appreciations as well. It gets complicated, but basically you can start making regular withdraws (once a month I think, always of the same amount) penalty free.

Index funds that charge 2%? There are insane ones out there, but that seems way high based on a bit of time with Google, which included one page that claimed the average management fee for actively traded funds was somewhat less.

I'm wondering where you're getting the 2% figure from, since I didn't mention it and the parent post didn't mention it. Maybe the grandparent-post?

The lowest of my actively-managed funds has an expense ratio of about 0.5%; the highest is around 1.5% (it's an international fund for some diversification). My index funds are typically around 0.05%, which is a factor of 40 less than 2%.

Oops, great-grandparent. Should have looked at the names, the flow of the conversation fooled me.

AFAIK you might be in the minority of 401k investors, as far as investment choice/freedom and fees goes.

In my experiences the choices have mostly come down to "you can pick one of these 12 funds".

I think my choices may also come down to "you can pick one of these 12-ish [actually, I think it's more like 20] funds", but most of the funds are index funds. In general I've found the selection pretty adequate for my needs, since I'd probably be putting it into index funds anyway, and there're only so many indexes out there. My only quibble is that there's not all that much international diversification possible - but my 401k limit isn't anywhere near my total savings, so I can just put outside money towards that.

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