401(k) plans have become a vital part of how workers save for retirement. But since you can't choose from among multiple plans and are instead stuck with whatever investment options and plan features your employer gives you, it can be next to impossible to assess whether your employer is treating you right -- or whether a company you're investing in is demonstrating the commitment to its workers that will keep it at the forefront of innovation in the years to come.
But investment advisory website FutureAdvisor is out to change all that. By offering a closer look at the 401(k) plans that companies of all sizes offer their workers, FutureAdvisor is shining a light on an often-misunderstood area of employee benefits.
Getting the scoop on 401(k)s
FutureAdvisor's overall goal is to help people manage their money better. By collecting information about your portfolio from various brokerage providers, the service seeks to give you broad-based recommendations about overall asset allocation strategies as well as specific, personally tailored moves to make in order to get your portfolio more in line with those overall recommendations.
But along the way, FutureAdvisor has also made a lot of information about employer 401(k) plans publicly available on its website. By combing through public disclosures, the company gets access to important information like plan investment options and fees. But because the disclosures are complicated, FutureAdvisor runs the information through its own proprietary filters to give users the most important elements -- while also driving its ability to tailor investment recommendations to participants in those plans.
So what does FutureAdvisor have to say about some of the biggest tech companies? Let's take a quick look:
Apple's 401(k) plan has $1.6 billion in assets and serves almost 44,000 participants. With 24 investment options, the company's plan offers a variety of low-cost index funds along with higher-expense actively managed funds.
FutureAdvisor gives Apple's plan four stars out of five. In its brief commentary, the site notes that for a company that's so dominant in technology, its 401(k) plan isn't equally exemplary, with some plan options that have higher fees than necessary.
Like Apple, IBM also gets four stars for its plan, which has more than 200,000 participants and $36 billion in assets. The plan has a whopping 168 different options, and with an average balance of more than $175,000 per worker, IBM's plan has clearly been successful in helping many workers save over the long run.
Among all those investment options are choices from Vanguard, Fidelity, and numerous other companies. In FutureAdvisor's words, those options include "many low-fee and passively managed index funds, which form the basis of a great long-term investing strategy."
Microsoft's plan gets a five-star rating, due in large part to what FutureAdvisor calls "a mix of amazing fund choices not available on the open market." Its 24 plan options come with an average expense ratio of just 0.27%, somewhat cheaper than IBM despite having just $7 billion in assets. With just over 65,000 workers covered under the plan, the average balance of nearly $110,000 compares fairly well to its peers, especially given that its history is far shorter than IBM's.
Intel gets only three stars for its plan. Despite having nearly $5 billion in assets and more than 52,000 participants, the average expense ratio for its 30 plan options is 0.48%, making it somewhat pricey compared to its peers. As FutureAdvisor put it, the plan is "good but not great, with options that are more expensive than necessary for a 401(k) plan of its size and clout."
Despite offering low-fee choices and "harder-to-get asset classes such as REITs," HP's plan only earns three stars from FutureAdvisor. Overall, the fairly high expenses among some of its 30 investment options make it essential to be smart about picking the lower-cost alternatives offered in the Fidelity-run plan. The plan has $14.7 billion in assets and 145,000 participants.
What's your plan?
With a big database including companies small and large, FutureAdvisor has interesting insight on 401(k) plans. The information it offers should be a valuable draw in attracting customers to its investment service, but even by itself, 401(k) information can tell you a lot about whether your benefits are top-rate or leave something to be desired.