Questions to ask employers about their 401 (k) plan

When interviewing for a job or searching for your next retirement investment, 401 (k) plans are always a standard option for most individuals. When it comes to a plan provided by a potential or current employer, here are some questions you may want to ask:

Do you have a 401 (k) plan?

Always make a point to directly ask the potential employer if they carry a 401 (k) plan for employees. Note: Many companies require you to be a full time employee to receive 401 (k), health insurance, and other employment benefits.

Does your 401 (k) plan match after a specific amount? How much?

Ask if the company matches a designated amount. If so, ask how much that amount is. For example, this means a company might match your first $75k. This says the company will also provide $75k once you begin to “cash out.” So your initial target is a minimum of $75k investment to get it matched. Then, either consider to invest in other options or continue to invest in that retirement plan.

How long until the 401 (k) plan matches the designated amount?

Consider asking the employer if there is a timeline/time frame in which you have to complete the 401 (k) plan. Most retirement plans have a time frame or age restriction on “cashing out.”

How were the 401 (k) plan package options chosen or selected?

Ask the employer if an individual, committee, or affiliated party selected the retirement plan. Also ask how they came to this conclusion and how it compares to other options. What is the rate of return, level of risk, and influences on stocks/shares. Then begin to ask yourself, is this the best option for my retirement goals.

Is there a conflict of interest between the company, affiliated parties, and the chosen 401 (k) plan?

While asking how the package plan was selected, begin to investigate if it was only chosen to benefit select parties. If this plan was only selected because it is the lowest form of benefit provided by the company, but is just enough to encourage/entice employment, then maybe you should consider other options.

Who dictates the addition/removal of investments choices or packages?

Understand how packages/investment options are manipulated. Be aware of who changes them, adds options, or eliminates previous choices. Also ask how these decisions are made and why?

How much are my monthly contributions?

For the sake of budget, does the employer have minimum monthly contributions. Sometimes, a payment plan can be set up to pull x amount from your payroll to dedicate toward the retirement plan. Age will also be a huge factor if there is a time frame toward retirement and how much must be contributed each month.

Do I have administration fees? If so, how much are they monthly?

Ask if the employer requires fees to handle your 401 (k) plan, transaction fees, admin fees, etc. How much is the company charging you on the back end to monitor and perform transactions?

Should you invest in a Roth IRA Brokerage account instead?

There are differences between a 401 (k) and Roth IRA that we can explore in another article. For the sake of this one, understand that if a company doesn’t match a set amount of your investment, you might consider a Roth IRA account that won’t tax you on your pay-out. Meaning when you cash out for retirement, you won’t be taxed like an income.

Hope these questions assist you in finding a retirement plan that works for you, or at least provide you with questions you can ask to determine which plans may NOT be for you.

If you have any questions or concerns, feel free to contact us via contact form.

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