It’s National 401(k) Day!

Happy National 401(k) Day! How will you be celebrating it?

What’s that — You’re not celebrating it? That’s understandable. After all, every day is a holiday now — In addition to Halloween and Mother’s Day, there’s National Ice Cream Day (Ben and Jerry’s gives out free cones!), national Pokemon day, and Hug a Farmer Day. You can even register your own holiday. But National 401(k) day is a day you should actually pay attention to — it’s the day you should do your Annual 401(k) Checkup.

Looking into your retirement savings sounds about as much fun as going to the dentist (which, crazy enough, experts say you’re supposed to do twice a year). Fortunately, this isn’t as painful as you think, and getting your 401(k) set up right can make a big difference in terms of having a brighter future. With a quick checkup, you could make changes that could forever improve your future.

This article is written from the perspective that your employer is offering you a plan. Fortunately, about 80% of Americans are offered some sort of plan by their company, though many small businesses don’t have one available.

Increase Your Contributions
Are you already contributing to your 401(k)? If so, that’s a great start. Only about 44% of Americans are contributing. The first thing you should check is whether you’re maxing out your employer matching. Many employers offer additional funds to employees who contribute to their account. If you’re not maxing it out, you’re leaving money on the table.

Even if you are maxing out your company match, you should probably contribute more. Try bumping up the amount of money you contribute every month — The maximum for people under 50 years old is $18,000 a year. Now, that may sound like a big chunk of your paycheck, but remember it’s pre-tax dollars, so it’s the equivalent of only about $12,000 in take home pay. So regardless of how much you decide to invest, if you took it as salary, you’d only get about two-thirds of it, and the rest would go to taxes. So try saving more and see how it feels — you can always dial it back down later. Your future self will thank you.

Optimize Your Investments
Saving money for retirement isn’t enough — you also have to make sure it’s invested properly for your needs. A few tips: Think about how comfortable you are with risk. Long-term investments are all about remaining comfortable while weathering the storm of volatile markets, and though it can feel counterintuitive, it’s oftentimes best to just stick with your investments. Still, if you’re particularly risk averse, there are ways to invest your money which are less tumultuous.
Think about your future needs. When do you plan to retire? And is your 401(k) your sole source of retirement funds, or do you have a partner who will also be contributing? Thinking ahead can make a world of difference.

Roll Over Your Old Accounts
Have you switched jobs over your career? Most of us have, particularly younger Americans, who tend to jump from company to company with high frequency. When you switch jobs, it’s easy to forget about money laying around in old 401(k) accounts. A good option may be to “roll over” those accounts into your current 401(k) provider for a number of reasons. First of all, consolidating accounts is an opportunity to save on fees. Many older retirement accounts charge surprisingly high fees. Even a 2% fee can cost you a fortune by the time you retire.

Consolidating accounts makes it easier to see all your money in one place and keep track of it. It can be easy to lose track of old accounts, particularly when your previous employers may not have your new address after you move.

At Vestwell, we believe that everyone deserves the right to receive unbiased advice and quality investment services at an affordable price. We’re proud to be at the forefront of a wave of 401(k) reform. You can learn more about our offering on our website at

Turbocharge 401(k) Participation: Two Smart Strategies for Advisors to Turbocharge Retirement Plans

Two Resources, Two Effective Tactics, Two Essential Steps

By Vestwell Staff

Meet Allison. At 24, she is a second year auditor in the Boston office of a regional consulting firm. When Allison joined the firm, she sat in a room with 40 fellow recruits to listen to a mandatory presentation about the firm’s benefit package. Squeezed between inventory training and the happy hour, that session was a blur of legalese. How was she supposed to pick the right funds if they all looked the same? On her way out the door, Allison tossed the thick 401(k) paperwork package into her desk drawer. That’s where it still sits, two years later.

Robert, the IT support team leader with an office a few doors down from Allison’s desk, has his own retirement worries. Robert is a baby boomer, and fears of being unable to retire are looming large on his radar. He is a well-respected professional with a long, successful career, yet his contributions to the company’s 401(k) plan have always been just the bare minimum. While Robert worries about his lifestyle in retirement, without a clear understanding of his investment options or tools to make intelligent decisions, he struggles to find the motivation to invest more.

Allison and Robert are not alone. According to the Bureau of Labor Statistics, 55% of the American workforce has access to a 401(k) plan, yet only 38% of them choose to participate. And it is not only Millennials that are not adding to their savings. Half of baby boomers, many of whom are already past their peak earning years, have retirement savings of less than $100,000.

We believe that a major source of this problem is the way that retirement plan options are presented to employees.

Many employees just like Allison and Robert are discouraged from enrolling in their company’s 401(k) plan or using it to its full advantage. Common obstacles include the cumbersome onboarding processes, confusing investment fund options, cryptic language and intimidating systems.

It does not have to be this way.

At Vestwell, we envision a future where companies can rely on retirement planning advisors to offer a new generation of plans.

Here is what the future looks like.

Retirement Plans Must Offer Customized Solutions

The problem with traditional 401(k) plans is that employees are limited by poor choices when it comes to fund options. Many 401(k) offerings have excessive costs, poor performing funds and not enough diversification opportunities to allow investors to properly manage risk. Put bluntly, these “off the shelf” product offerings force employees into portfolios that are just not good enough.

Then there is the lack of independence. Too many 401(k) plans still lock employees into proprietary funds. This practice dates back to the early 1990’s when many of the 401(k) platforms were offered through large mutual fund companies. At the time, investment options were limited to the affiliate’s funds in part because the record keeping technology did not allow a broader spectrum of investment products. Technology has since advanced, but many providers remain stuck in the past.

The solution is clear. Plan sponsors need a modern platform that will allow them to offer a wide range of independent investment options. Otherwise, underperforming and poorly managed funds will continue to limit the potential of plan participants to save enough for retirement.

Streamlined Onboarding and Plan Maintenance Are Key

Pensions were once the gold standard of retirement planning. A guarantee of retirement income was provided in exchange for years of service. Today’s 401(k) participation is anything but automatic. Employees must complete numerous paper forms and read through hundreds of pages of boilerplate disclosures. The convoluted enrollment process, combined with complex terminology, means that many employees fail to opt into their company’s 401(k) plan participation out of sheer confusion.

But it is not just employees who are exasperated and confused by the status quo.

The first 401(k) plans were launched back in 1982, yet the volume of paperwork that plan sponsors have to deal with has only increased. They also have to manually track enrollment status and participant changes and there is a stubborn lack of visibility into the fee structure of funds, which makes it difficult to compare costs across providers.

The maintenance of a 401(k) plan has become a full-time job for sponsors and the results (measured by plan participation and fund returns) leave much to be desired.

What would it take to turn 401(k) plans into the valuable engine for retirement savings that they were intended to be? We believe that the answer lies in maximizing the use of technology. If vendors and partners could automate the time-consuming and error-prone processes of enrollment, account maintenance and reporting, plan management would become much easier. Adapting the design of the plan to fit the changing needs of the plan sponsor should take a few clicks, not dozens of forms and weeks of waiting.

The benefits of automation should also extend to plan participants. Vestwell’s research shows that companies with automatic 401(k) enrollment can double employee participation rates. Other surveys have shown that employees with automated enrollment begin saving for retirement earlier. They also report that saving for retirement is easier. A strong 401(k) savings plan can go a long way towards retaining valued employees, recruiting new promising talent and creating better retirement outcomes.

Tips for advisors to turbocharge retirement plans

The current state of retirement savings enrollment is costly, cumbersome and confusing. If your company’s retirement plan participation statistics are disappointingly low, maybe it is time for a new approach. The 401(k) may not be the magical cure, but when used correctly it can be a powerful tool for creating peace of mind in your employee’s retirement.

Contact us at for more information about turning your 401(k) offering into a benefit that is easy to administer and manage.