Ask Your Employer These Five 401(k) Questions In 2019
Employers and 401(k) plan providers have been focused on fiduciary responsibility for expensive investments and excessive plan fees. In the retirement world, that is referred to as “the three Fs”—funds, fees and fiduciary.
However, change is coming. 2019 will be the year of the “P”—the participants. The critical 401(k) issues for employees are:
- Does my employer sponsor a 401(k) plan, and if so, should I participate in the plan?
- How much should I defer from my paycheck, and how should I invest my deferrals?
- What do I do with my money when I retire, and what else do I need to worry about for retirement?
Over the years, large employers and 401(k) providers have offered services to help with some of those decisions. For example, some employers automatically enrolled their employees and added programs that automatically increase salary deferrals, unless an employee elects out of participation or out of the deferral increases.
However, those services have been piecemeal. And the bigger questions, including what do to upon retirement, are usually left unanswered.
In 2019, the trend will be to provide more comprehensive financial services—sometimes called “financial wellness”—to participants. Those services should be able to answer these questions:
- How much should I defer into my 401(k) plan to have a secure retirement?
- If I can participate in a health savings account (HSA), how should I divide my contributions between my HSA and the 401(k) plan?
- How should I invest my 401(k) account, considering my personal circumstances and needs?
- When I retire, should I take the money out of the plan and roll it to an IRA?
- How should I invest the rollover IRA and how much can I withdraw each month, so that the money lasts for all of my 20- to 30-year retirement?
Those critical questions need to be answered for every person. But people’s needs differ, which means that advice needs to be personalized.
As with any new program, employers may be worried about liability for giving financial advice to their employees. However, the risk can be managed by reliance on competent providers.
As a word of warning, these programs are in their infancy. The services may be limited, for example, to making 401(k) contributions, paying down credit card debit, contributing to a Health Savings Account, and establishing a “rainy day” savings account. But, with time, they will become more robust and offer a full suite of financial education and advice.
If your employer doesn’t offer these services, what should you do? Contact your employer’s HR office and ask if they are planning to offer these. If not, ask if they would consider contacting their plan provider to see what’s available . . . and then to add those services.
From an employer’s perspective, the starting point is to contact your 401(k) provider to see what participant services it offers for your employees. Most of the competitive providers have programs for the financial wellness of participants in the plans they handle. Make sure you are taking full advantage of the services offered.