Many ETFs offer tax efficiency because of their structure. This is not a relevant feature of a tax-deferred retirement plan, such as a 401 (k). ETFs are similar to mutual funds. If your 401 (k) options include an ETF (or any investment fund) that you consider a good choice, there's no reason not to choose it.
For most people, a 401 (k) is the best option, even if the investment options available aren't ideal. For better results, you can opt for index funds that have low management fees. The primary advantage of a 401 (k) account over an index fund is the tax advantage. Contributions to 401 (k) accounts are pre-tax.
Homeowners don't pay taxes on the dollars they invest or on the profits in their investment portfolio until they start withdrawing funds. ETFs are traded closer to stocks than to mutual funds. Most 401k platforms are based on the premise of mutual fund trading and daily valuation. Because ETFs are traded closer to stocks, they generate commissions when they are traded and may have higher valuation swings at any given time.
A 401 k plan and its platform must determine how to reduce these fees so that the low spending ratio becomes a benefit for participants and is not offset by trading costs, while they can manage the plan in a system created for mutual funds.