Your 401(k) could make you a millionaire. By making small, regular investments starting in your 20s or early 30s, your savings will grow tax-free for 30 to 40 years. Unfortunately, people tend to procrastinate because they are focused on bills that are due today and the things they want right now. We human beings are notoriously bad at wrapping our minds around far off events.
When it comes to investing, time is a big advantage. Here are three reasons why.
When it comes to trying to reduce risk in your 401(k), the phrase “”don't put your eggs in one basket”” applies. Therefore when selecting investments, it's important to diversify.
Editor's note: There is a more up-to-date version of this article at 401k Providers: 2017 Top 10 Lists. Thanks!
Plan sponsors, that is companies that offer their employees a 401(k) plan, have many choices when selecting service providers for their defined contribution plans. The challenge for many businesses, especially for small businesses, is that the day-to-day running of their businesses leaves little time to review, monitor, and optimize their retirement plan. The result is that many plan sponsors lack a comprehensive understanding of who the top 401k providers are. PLANSPONSOR magazine conducts an annual recordkeeping survey profiling top providers. Here's their list of the 2016 top 401(k) providers and a few of my thoughts.
If you're a plan trustee, I hope you're paying attention. Employees have been increasingly active fighting against “excessive fees.” Just in the 4th quarter of last year alone, there were eleven major class-action lawsuits filed in federal courts against 401(k) sponsors or providers of retirement products. Most suits allege that participants’ retirement savings were compromised because employers, as plan fiduciaries, failed to act in participants’ best interests and breached their duties under the Employee Retirement Income Security Act (ERISA) by allowing high fees, poor fund choices, and conflicts of interest.
If you are among those who thought only multibillion-dollar plans (Cigna, Edison International, ABB, International Paper, Boeing, Lockheed Martin) were at risk because small- and mid-sized plans won't get sued, think again. A new class-action lawsuit was filed in the Minnesota federal court targeting excessive 401(k) fees in a $9.2 million plan with 114 active participants. Damberg v. LaMettry’s Collision Inc., claims that plan fiduciaries breached their duties under ERISA for allowing excessive fees to be charged for plan investments, record keeping, and administration.
18-years ago, I worked for a company whose 401k offering had high fees, poor investment choices, and poor service. Employees felt powerless with exception to trying to ask good questions at the meeting once a year when the 401k provider came in. Unfortunately, our questions were never well answered and our employer did not hear our desire for improvements to the plan. The good news is that those days are fading quickly and employees are increasingly empowered.
Defined contribution plans like 401k's transferred a lot of responsibility for managing one's retirement investments from the employer to the employee. In an effort to best achieve retirement goals, it makes sense for employees to also be involved in fighting back against high 401k fees and for better investment options. After all, you've got to fight for your own self-interests.
Editor's note: There is a more up-to-date version of this article at 401k Providers: 2017 Top 10 Lists. Thanks!
The good news is that plan sponsors have many choices when selecting a recordkeeper for their defined contribution plans. The challenge for many businesses, especially for small businesses, is that day-to-day running of their businesses leaves little time to review, monitor, and optimize their DC plan. The result is that many plan sponsors lack a comprehensive understanding of who the top 401k providers are. PLANSPONSOR magazine conducts an annual recordkeeping survey profiling top providers. Here is their list of the 2015 top 401k providers and a few of my thoughts.