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Saturday, October 30, 2010
picture by DRW
People don't like to think about retirement. Understandable. It is thinking about getting old. It is thinking about having to save today for the future. It is about having to make decisions about what to invest in and trying to understand the jargon-laden marketing materials handed out by fund sponsors.
All of this bumps up against the awkward fact that most of us will one day wake up to our 65th birthday.
That's when the choices available to us in prior years will loom large in giving us choices in the coming years.
One of the keys is, of course, the 401k you have at work. The better it is in terms of low fees, good investment choices, company match etc., the greater the opportunity for you to achieve a successful retirement.
Until fairly recently, it hasn't been possible for you to assess your 401k. You pretty much had to settle for what was provided. Today assessing a 401k is typically fairly easy by going to www.brightscope.com. There, type in your company's name and see right away if your 401k is rated.
If it is not rated, I recommend talking to your plan administrator about getting it rated. You want to see how your 401k stacks up against similar 401ks. Do you have good investment choices, are fees low etc.?
You can also enter your investment choices via a link on the page and see explicitly the fees you are being charged on the funds you are invested in. This is the type of disclosure data the Department of Labor has been seeking.
The component ratings are shown as follows:
CLICK TO ENLARGE The example shown here is for one of the biggest employers in Howard County, Maryland. With this information in hand, a participant can question a plan administrator about investment choice. Can it be improved? Why is it "average" compared to peer group plans?
With this data in hand, administrators can take steps to improve the company 401k.
I suggest spending some time looking up the 401ks for family members and seeing how they stack up. You'll be glad you made a bit of effort when the 65th birthday rolls around.
Disclosure: I subscribe to the detailed Brightscope data base and talk to 401k administrators about this data