Is your current 401(k) not cutting it? Here is how to request a better one from your employer
A significant portion of Americans are saving for retirement through 401(k) plans.? The Investment Company Institute pegged this number at about 53 million employees, with over $4.5 trillion invested through 401(k) plans.? Despite its centrality as an investment tool, many companies unwittingly participate in 401(k) plans that don?t provide the best return on investment.? Here are some tips for getting your employer to shift to a better 401(k) plan.
What Needs to Change?
First, look at the fees associated with the plan.? High fees?compared to plans with similar investment funds and rates of return?are a good reason for an employer to switch plans, as those fees significantly cut into retirement savings.
Next, look at the investment options offered in your 401(k).? Your plan should offer at least one index fund, which track benchmarks such as the S&P 500 or the Barclays Capital Aggregate Bond Index.? These funds offer lower risk through broad market exposure and generally have lower fees than active management funds.
Lobbying for a Change in Plans
Before approaching your employer, do your research.? Many companies, particularly smaller ones, don?t have an investment expert making these decisions.? It will be helpful if you can provide your employer with non-biased expert information on the benefits of switching to a new plan.
Remember to remain humble and appreciative in requesting these changes.? After your research, you may know more about your plan than the person you need to convince.? Still, no one likes being told they?ve made a mistake that?s costing their coworkers valuable retirement money.? Instead, frame the discussion as a constructive conversation about how to save everyone money going forward.
For advice on how to restore/revive your 401(k) after it has taken a hit, take a look at our previous post on the subject.