Friday, February 23, 2007

Company 401K Plan Evaluation

Recently there have been discussions by PF bloggers on the high fees and low quality of offerings by their company's 401K plan. Based on the issues, I decided to take a closer look at our company's retirement plan.

Based on the information I found, it appears we have been relatively well taken care of by our company's retirement plan and the adminstrator that was chosen. We have a small administrative fee (about $100) per year, depending on the size of retirement account. The plan has a limited, but excellent, choice of very good funds, with expenses of 0.03% for the S&P 500 index fund and between 0.30-1.5% for the specialized funds (international, bond, small cap, and blend). All the information (e.g. expenses, investments styles, quarterly results) on the funds is published on the adminstrator's website. While I do think the some elements can be improved, I don't see issues as egregious as ones (e.g. asset management fees of 0.5%) that have been shared by others.

The primary concern with our plan is that the company contribution of the retirement funds is invested entirely in our company's stock. And there are no diversification options until one is 50 years old. While our company stock has done well historically, the heavy weighting puts my retirement savings at risk if the stock price should drop.

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Photo Credit:, Mary R. Vogt

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

1 comment:

makingourway said...

Company stock also increases your risk as your income and investments are invested in the same institution. If the company's fate should take a turn for the worse, you'll have higher risk. Then again, since it's only the company match and the investment plan sounds very reasonable, I wouldn't lose much sleep over it.
Regards, makingourway