If you contribute to a workplace 401(k) plan, you might not be getting your money’s worth. While many plans are indeed good, others, not so much. Signs of a good plan include an employer match, low administrative costs and low cost investment choices. Here are a few things to check to see if you have a bad plan.
First off, administrative, maintenance and recordkeeping fees are generally standard. However, there are some administrators that don’t follow the norm. Typically, these fees are based on the number of participants in the plan, not on the value of the assets. If your administrator charges you a percentage on the total assets, you should probably look elsewhere. Speaking to the administrator may also help lower the percentage as the assets increase.
Next, your investment options will have funds managed by your plan’s provider, however no fund company can offer you the best choice in every asset class. Make sure you have other lower cost options throughout all the classes. Often, the funds offered may be more in the provider’s best interest not that of you and your employees.
Beware if you have a group annuity plan. These plans offer mutual funds or annuity sub-accounts that are ‘wrapped’ into a group annuity. These types of investments are expensive and complicated and don’t offer you many benefits. It might even be hard to change providers if you have one.
Lastly, make sure you have a wide array of index funds offered across several asset classes. These investments are usually low cost and easy to understand and a staple for many savers. Options should include an index fund that covers both domestic and foreign stocks as well as domestic bonds. This helps investors better diversify his/her portfolio.