However, there have been some major hurdles that are barring widespread use of ETFs in the plans: No real cost-effective trading software has been implemented to allow participants to perform the necessary tracking. Accounts can’t own fractional shares of an ETF. ETFs trades are based on commission fees, like stocks, which may diminish returns due to the periodic salary-deferral contributions. [ETFs Face 401(k) hurdles]
Currently, ETFs account for less than 1% of the $1.2 trillion 401(k) market, with companies like ShareBuilder, Schwab, TD Ameritrade, Invest’n’Retire and ExpertPlan providing ETF options in their retirement plans.
If you would like to include ETFs in your 401(k), the best way is to let your employer known and begin asking ETF options that would work well with your retirement portfolio.
For past stories in this series, visit our “What is an ETF?” category.
Max Chen contributed to this article.