“The Mole” is a certified financial planner and public accountant who, in his spare time, provides a behind-the-scenes view of the financial planning industry for Money magazine. In his most recent column, The Mole explains how to deal with a bad 401(k) plan.

“401(k) providers don’t actually care how they make money,” he writes, “just as long as they make a tidy profit.” The providers can make money by:

  • Offering good choices to employees, but charging employers high administration fees.
  • Charging low administration fees, but offering high-cost investment options to participants.

The Mole notes that smaller employers can’t afford to pay high administrative fees, so they may opt for something cheaper, not realizing that they’re simply shifting the cost to their employees. If your company offers a lousy 401(k) plan, the first thing to do is talk about it with your employer. If that’s not fruitful, The Mole recommends that you:

  • Always taking the employer match. “I’ve seen some pretty pathetic 401(k) plans, but I’ve never seen one so bad where it made sense to pass on the [employer match].”
  • Look into IRAs. If your company’s 401(k) plan doesn’t offer good choices, make funding your IRA a priority. A Roth IRA is an excellent way to save for retirement.
  • Consider bonds. Bond funds tend to be less expensive than stock funds. If you have lousy 401(k) options, it may be a good place to hold the bond component of your portfolio.
  • Favor index funds. Index funds have lower expense ratios than managed mutual funds. If the other funds in your plan are expensive, try to find an index fund with low fees. (I’m a fan of index funds in the first place, and think they should be one of the first places you look regardless.)
  • Opt for a rollover. When you leave your employer, be sure to roll your 401(k) over into an IRA. “That’s the only way to get out of these really lousy selections,” writes The Mole.

I’ve never participated in a 401(k), but we have a similar retirement plan for the employees at the box factory. When we first set this up thirteen years ago, the plan was managed by Smith Barney, a large national brokerage. At that time, I would never have noticed that Smith Barney gave us lousy options. Our returns lagged way behind the market. Fortunatley, my cousin (who is the bookkeeper for the business) knew more about investing.

He discovered that Smith Barney not only offered us lousy investment options, but they churned our account — selling funds and buying new ones in order to generate transaction fees. He dumped them in a flash and has been managing the retirement accounts for the business ever since. Naturally, he has our money in low-cost Vanguard index funds.

Most people don’t have the option of seizing control of their retirement accounts like we did. For them, it’s best to follow The Mole’s advice when faced with a bad 401(k) plan.

[CNNMoney: How to deal with a bad 401(k) plan]

This article is about Choices, Investing, Retirement