22 July 2018

How Good Is Your Company's 401(k)?

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Source: Wall Street Journal | Date: January 4, 2013

 Before you stuff the bulk of your retirement savings in your 401(k), it's worth taking a close look under the hood.  

Some companies are tinkering with their retirement plans in ways that raise questions about whether a 401(k) is a worker's best option for building a nest egg. International Business Machines Corp., for example, said in December that starting this year, it will make all of its 401(k) matches and other contributions on Dec. 31, rather than during each pay period. This poses several disadvantages for workers: It means missing out on a year's worth of potential growth in those matching contributions; and those who leave the company before Dec. 15 will forfeit their match for that year, unless they are retiring.

While IBM's approach is still rare, fully 22% of employer plans surveyed by the Defined Contribution Institutional Investment Association said they intend to restructure their matches in some way. Thus, workers with 401(k)s might do well to look anew at how much they allocate to their plans, how competitive their plans are compared with other retirement savings options, and whether their employers are proposing changes in their plans.

Although it almost always makes sense to contribute enough to get your company match, whether you should put more than that into the same basket depends on how much you're being charged in administrative fees, the quality of the investments available, and other factors. Alternative baskets for your retirement savings include individual retirement accounts and variable annuities, both of which also can shelter tax-deferred earnings.

Here's what to look at in your 401(k) to help decide whether it deserves to be the primary focus for your retirement savings:Before you stuff the bulk of your retirement savings in your 401(k), it's worth taking a close look under the hood.

Read more of this article here.  

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