workers have the best 401(k) retirement plans, a new
study claims, but that’s little comfort to Capt. Mike
Burr, a 60-year-old American Airlines pilot still on the
job after years of contract concessions, pay cuts, a
pension freeze and a 2011 bankruptcy filing.
American, United and Southwest airlines swept the top
four spots on a new ranking of the Top 30 401(k) Plans
by BrightScope. The list considered plans with more than
$1 billion in assets and ranked them on generosity of
company contributions, vesting schedules, fees and
have bolstered their 401(k) plans to help soften the
blow of pension freezes, but the list provides a good
illustration for retirement savers about how individual
outcomes can vary dramatically, even among participants
in a great plan.
Burr began his career 29 years ago after a stint in the
U.S. Navy, pilots had a mandatory retirement age of 60.
The mandatory age is now 65. Burr, a pilots’ union
official, says he’ll need to work right to the end,
and still won’t have enough to generate the retirement
income he expected for most of his career.
401(k) plan looks lucrative, if you have 40 years to
accumulate," Burr said. "I don’t have time
on my side."
measure how your own plan stacks up, consider these
numbers from BrightScope:
$15,000 – That’s how much, on average, companies on
the list paid out per retirement plan member in matching
or profit sharing contributions.
26 of the top 30 – That’s how many of the companies
on the list make new hires immediately eligible to
participate in their retirement plans.
29 of the top 30 – The number of companies that make
their matching 401(k) contributions immediately vested,
rather than using a vesting schedule to lure employees
to stick around.
0.22 percent – The total average annual cost of the
best plans, compared to more than 1 percent of assets
for the smallest plans in the BrightScope database.
advisers say employers have made a lot of progress on
lowering fees in recent years, though some say they
still find odd plan design quirks that hurt savers.
client saves in a 401(k) that only matches funds
invested on a pre-tax elective deferral basis, meaning
employees saving in a Roth 401(k) miss out on the
company match, said John Gugle, an adviser with Alpha
Financial Advisors in Charlotte, North Carolina. Others
fail to get the full company match because they
accelerate their contributions early in the year.
advocate for our clients when we feel that their plan is
sub-standard," he said in an email, though he noted
that investment fees have been declining steadily and
investment choices in plans have generally improved in
advisers say many plans still have a long way to go to
be considered investor-friendly.
participants in smaller plans are still stuck with high
cost, commission-based products," Sean Condon, an
adviser with Windgate Wealth Management in Chicago, said
in an email.
by federal legislation aiming to cut expenses, that is
changing, but some fear the rush to low-cost index
mutual funds will subject older participants to more
market volatility when they have little time to recover.
Though studies have consistently shown index funds
outperform actively managed funds over the long term,
some advisers say near-retirees could pay the price for
blind adherence to index funds.
many higher cost, actively managed funds have
under-performed index funds during this bull market, we
are seeing a return to volatility," said David
Mullins, a financial adviser in Richlands, Virginia.
"Actively managed funds typically earn their keep
protecting on the down side."