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Thursday, September 16, 2010

Which 401k?

Here's the problem: a man and the wife each work at different companies, and, in total, they are saving less than the max allowed in their 401ks. For example, maybe, in total, they are saving $12,000/year. Whose 401k should they use?

One thought is to see how the 401ks are rated. A useful resource is BrightScope. If their plan is rated by BrightScope, the site produces a component assessment:

Click Image to Enlarge Comparing the plans side-by-side gives you an idea on which has the lowest fees, best investment menu, higher participation rate, etc.

Full disclosure: I counsel pension funds using the BrightScope data.


  1. You have an error in your link to Brightscope. My wife and I try to max out our 401k contributions each year.

  2. re: Grouch Thanks for pointing out the bad link. I fixed it. It is good to be able to max out. Some can't and there is a big difference in 401ks. Sometimes people put the same amount in each when one plan has high cost and poor choice and the other one is much better.

  3. We don't have the greatest of plans, but I'd rather get the match and max out for the tax break.

  4. Use the BrightScope report to improve your plans. If the plans don't stack up well relative to their peers ask why. The administrators have a fiduciary responsibility to provide low cost appropriate choices. If they don't, participants need to ask why now - not 10 years from now when they get ready to retire.