Are All 401K Plan the Same?
Year ago businesses offered most employees a retirement plan that was automatic. This however was quite expensive and fewer and fewer companies were able to offer this benefit. The 401K Plan was created to let employees fund their own retirement with tax advantages to both employer and employee. This solution allowed employers to pass the responsibility of funding retirement off onto their employees. Some companies add to an employees contributions to this fund, in varying degrees, as a benefit to the employee.
Man individuals feel secure, believing their 401K retirement plan will be adequate to fund their retirement. This is based on the flawed assumption that over the long term investments will outperform inflation. However this is not always the case. If an employer chooses a company to manage the retirement fund for their employees that charges high fees, the employee may end up with very little at retirement if the investments did not do well. Most investment companies will tell you that past investment performance may vary from future results, but most people only see the high percentage rate of return
If you take low return and subtract the fees of the pan administrator, many employees are shocked at what thy really have left. It is extremely important that employers chose a plan administration company with the lowest fees to avoid this scenario.