Now that pensions are on the endangered species list, your financial future lies increasingly in your own hands. Employers will typically help, but the degree to which they do so varies widely. To see how your own retirement plan stacks up, and how you can make the most of it, compare its features to the nation's very best.

The 401(k) plan has replaced most vanished pensions. The typical retirement plan these days will have a company matching 50% of your contributions, up to 6% of your salary. If you're getting less than that, don't be shy about voicing your concerns to your HR department. (According to Fidelity, the average worker plunks 8% of her or his income into a retirement plan.)

What the best do
The best retirement plans go well beyond the average:

  • Some companies match employee contributions 100%, sometimes up to 10% or 15% of pay.
  • Other companies will reward you for sticking around by upping their matching level as your tenure increases. If you like your job, this can be a great win-win proposition.
  • Several employers will contribute to your retirement plan whether or not you do. (That shouldn't give you an excuse to slack off.)
  • Matching funds often vest over a few years, but some companies have them immediately vested. With workers now moving from job to job every few years, that's a valuable perk.
  • Some companies offer profit-sharing, paying out bonuses tied to company performance each year. If your employer is firing on all cylinders, this can be a real portfolio-booster.
  • Many companies offer free or discounted financial planning sessions with professional advisors. Unless you're unusually well-versed in financial planning, this counseling could be a big help. Many of the best plans also offer some kind of health insurance benefit for retirees -- a welcome bonus, given rising health-care costs.

Top-notch plans with features such as these can ultimately help you save and invest as much as a quarter of your salary each year!

Maximize, maximize ...
If your company's plan probably doesn't sport many of the attributes of the best plans, don't despair. You can still improve your situation -- and your future.

For starters, make the most of what your company does offer you. Remember that matching funds are free money, which you simply can't afford to leave on the table. If your company matches up to 6% of your salary, then contribute at least that much -- if not more.

Next, make sure that you allocate your retirement-plan assets effectively. If you're parking all those funds in company stock when you don't have to, think twice -- you're taking a big risk if you aren't diversifying your funds among multiple investments. If you have to have money tied up in company stock until it vests, often over a period of three years or longer, spread it out into a variety of different investments as soon as you can.

If you're 10 or more years from retirement, it's generally best to have much, or most, of your money in stocks, since they tend to deliver much stronger returns than bonds and other options.

Finally, remember that you have other choices, including IRAs. Consider contributing as much as possible to both your 401(k) at work and an IRA you have on the side. The IRA contribution limit for 2010 is $5,000, or $6,000 if you're 50 or older in 2010. If you've signed up for a Roth IRA, you'll even enjoy tax-free withdrawals in retirement.

Don't be passive with your retirement. Take time to evaluate your needs and construct the best retirement plan for your future nest egg. If you're not comfortable making all of your own decisions, consult a financial advisor. A few smart steps taken today can transform your financial future.


True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Longtime Fool contributor Selena Maranjian owns shares of no company mentioned in this article. The Motley Fool is Fools writing for Fools.