Do You Want More Money For Retirement?
By Frank Cirullo
Many 401(k) plans waste people's hard-earned money on
unnecessarily high cost services and investments.
Did you know that Congress is investigating the high cost
of 401(k) plans?
It's quite likely that yours is NOT optimal regarding its true
cost, because facts show that retirement plans cost people
more than they think. And it seems that many employers are
unwittingly comparing their plans to the wrong benchmarks.
The good news is that optimizing a 401(k) plan (cutting its
cost and improving its investment performance) is easy.
Do you want more money for retirement?
First, make sure that the cost of your plan matches its
benchmark. This step requires you to learn what a truly low
cost plan looks like. The truly low cost plans don't have high
hidden and/or camouflaged costs. You must have the right
kind of training and experience to be able to identify every
cost that a 401(k) plan has.
Second, ensure that the core mix of investments at least
match the performance of their benchmarks. Easy! Low cost
index funds match the performance of their benchmarks, but
few managed funds match their benchmarks, long term.
Third, ensure that the asset-allocation, target-date, lifecycle,
lifestyle, and balanced funds have a long term track record.
Otherwise, it would be a mistake to put them in your plan.
Fourth, identify every conflict of interest and potential conflict
of interest so that you avoid paying too much for services and
investments.
Fifth, set up an effective system of checks and balances today
so that you can optimize your plan..
Most 401(k) plans are too time-consuming and expensive to
manage. Many waste people's hard-earned money on unnecessarily
high cost services and investments. It's common to discover that
workers have a menu of investments that under-perform their
benchmarks after expenses--both short-term and long term.
The employee often knows nothing about this because he or she
sees only the fund's performance, but not his or her actual return on
investment (ROI) after expenses.
When you do the math, it's easy to see that people are not getting
their money's worth!
|
Why not take a minute to compare what you have now, to what
you have the potential to have. Here is an example of an
optimized plan:
A diversified, core, mix of Index funds that cost you 0.07% to
0.20%, per year. (Tomorrow's benchmark for the cost of index
funds may be different.)
Record keeping and administration that cost you not more
than $25.00, per eligible employee, per year with no hidden
expenses. (Again, this is today's benchmark. Always know
the current benchmarks for the cost of services--that way
you'll save time and money.)
An education program that requires less time than you
currently spend.
An effective system of checks and balances.
Investments that match the market's performance.
You'll have more money for retirement if your investments
match the market's performance than if your investments
under perform it.
It's the employer's fiduciary duty to act in the best interests
of his or her workers, but it's your duty to be aware of your
options.
Let's review the benefits of optimization for both the
employer and employee:
1. Low cost services means that you can save more
money for retirement than if your plan's cost is higher.
2, Matching the performance benchmarks means that
you'll have more money than if your investments under
perform their benchmarks.
3. Valuable time saving programs means you'll spend
less time managing your plan, monitoring it for results,
and monitoring your own investments.
4. Effective checks and balances system means that
everyone who works for the company understands
how the plan was set up, why it was set up that way,
and how the plan is monitored for results.
If you don't optimize your plan now, how much
valuable time and money will your procrastination
cost you?
|
Frank Cirullo is a twenty-five year financial veteran
who teaches students how to have more money;
more time; less stress. Easy! For free lessons,
| |
|
|
|
|
|
|
|
First Capital Management
16776 Bernardo Center Drive, Suite 203
San Diego, CA 92128
1-858-487-1339
© Copyright 2008 by Frank R. Cirullo. All rights reserved.
All rights reserved. Printed in the United States of America.
No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording or otherwise
with the written permission of the author.
