What If You Don’t Like Your 401(k) And HSA Investment Options?

When coaching clients about their finances, one thing we try not to miss is making the most of their employee benefits. Underutilizing your benefits could mean you are missing out on convenient, low-cost resources that often even include free money in the form of matching contributions. Your employer’s benefits can offer you a literal wealth of value when used properly, but what do you do when the investments offered by your benefits provider are not to your liking?

Financial products have taken a huge step in offering convenience, lower costs and an ever-increasing selection of investment options. However, for those who are accustomed to certain bells and whistles, it can feel restricting to have to participate in an HSA or a 401(k) that may lack your favorite investment options. Here are a few ways to work around your employee benefit to help you make the most of what you must work with:

Working Around Your 401(k) Investment Options

Your 401(k) investment options are carefully selected by your employer, but what if you were more comfortable with your previous employer’s plan? You may be in a situation where you want to invest your 401(k) like your IRA. What can you do if the options you seek are not in the plan?

Brokerage Window

Some 401(k) plans offer a brokerage window, which allows you to pick from a wider range of investments. Keep in mind that with many choices comes more responsibility and perhaps increased fees and investment costs. If you use this option, the 401(k) administrator may offer some tools to screen and pick the best funds.

In-Service Rollover

Some 401(k) plans offer the ability to rollover your funds from your 401(k) to an IRA while you are still working if it’s money you’ve rolled into the plan or certain after-tax contributions or if you’re over age 59 1/2. If your company offers this flexibility, be sure to quantify the benefits of moving elsewhere. Specifically, are the funds in the IRA significantly better performers or lower cost or are the differences cosmetic? Also be cautious of an advisor pressuring you to perform the rollover. Be sure to understand the differences, particularly around the fees.

Rebalancing Across All Your Accounts

If you have investments in other 401(k) plans or IRAs and those vehicles offer more of what you want to invest in, buy more of those assets in the other accounts. This allows you to then overweight in the options you feel your 401(k) plan handles the best.

What Can I Do With My HSA?

Unlike a 401(k) plan, the ability to move funds from one HSA to another is universal. You are free to open your own HSA and transfer the money you’ve been saving into that account. If your employer contributes money to your HSA, you can set up transfers from your employer’s account to your own.

To start the process, open an HSA with a financial institution of your own choosing and set up automatic transfers or make manual transfers to your personal HSA. Most HSAs offer the ability to invest HSA dollars above a certain threshold, and investment options and costs differ depending on where you choose to hold the HSA. You want to be sure not to count contributions to your HSA twice on your taxes.

If you are not finding what you want in your benefits, hopefully the strategies above can assist you. Keep in mind that we live in good times for the financial consumer. Current investment options and fees in these plans are still significantly better than what I found when I entered the industry 20 years ago. Before you make a significant change, consult with that plan or a trusted financial coach to make sure it is worth the hassle.