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.