What you don't say is what the differ comp is invested in...  If it is company stock,  HELLO Enron!!  Bears sterns, ...

okay, these are bad examples,  but can you do a ratio between the two choices?  Have faith in her company but also, plan on the worse?

I agree with Limoman on index funds, I posted on mutual funds the case for actively manged funds..  otherwise goto Bogleheads and technical analysis threads..  These are things an active mgr worries about..  and makes a heck lot more than I do for advise..  they make 400K- 2M a yr..

What type of plan is this—a 457? If your total fees are actually 0.9%, then use the plan.  The fees plus the ER of the index funds (assuming the ER's are very low) puts the total costs on the low side on most plans.You should probably fund both the DC plan and a Roth. If you can't add 10k to Roths and fund the plan, then maybe add 5k to a Roth and fund the plan with additional money.

You haven't provided your age, but if you are 30 for example and contribute a total of 10k per year for 30 years, you will end up with about 1.4 million in today's dollars (not inflation adjusted). That will allow a safe withdrawal rate of $56,000/year.

Paul 

Since these are pre-tax contributions, I'll assume this is a 457(b) plan.

Now, whether to contribute to this or not really will have to do with your investment choices and the annual plan fees. Non-profit 457(b) plans have a bad reputation for the excessive fees and expensive, mediocre performing mutual funds the plan administrator (usually an insurance company) make available to plan contributers. You'll need to check on this.

If so, I think I'd pass on the 457 plan and contribute to your IRA.

 BruceM

I should tell first that you could do a combination of both.  Note: Check IRS publication 590 to see if you are with in income qualification before you try it however. 

Vanguard will let you start an account in index fund at 3000$. 

There is one major advantage to having a Roth account.  You can withdraw you initial invest at any time with out penalties.  Do read all the term of the account before try to do this.

Do you have an emergency savings account?  I don’t use my Roth account for this but you can save money in a bank FDIC insured Money Market or CD account with in a Roth IRA.  Banks like Bank of America and Citi Bank have it.  I would think that most banks would do the same.  It would be great to earn intrest tax free for your emergency account however you would have to leave the interest in there for 5 years.  Check the term of Roth before trying this.

Oh yes forgot to tell you can start a IRA at a bank for as little as 50$.  Once you build it up to say 3K$ you can transfer directly to mutual fund company like Vanguard.  Check with Mutual Fund Company before transferring assets.

Remember that money that is put in to your deferred account is about 50% larger to compensate for the taxes that are not taken when you try to compare it to a Roth account.

Just for fun calculate your taxes with both account just to see what I would be like.

The main advantage with the differed compensation account is dollar cost averaging.  You can make small buys (like 20$) ever payday automatically.  This tends to smooth out the highs and low of the market over time.  

Note: There are extremely high tax penalties for withdraws for deferred account and some like my 457 there is no loan provision. 

Note: There are some legal protection for 457 accounts   (I am not sure so please check) under lawsuits and bankruptcy