ISAKOV Planning Group Blog
Monday, February 03 2020
How Do You Choose Among 401K Plans?
Whether you’re an individual in a small, midsize, or large company or small business owner, choosing how your long-term savings will meet your retirement needs is one of most important decisions you’ll make (for yourself and/or your employees). Investing in retirement plans like IRAs and 401Ks can not only help you secure your financial future, but they play a key role in creating tax savings each year you invest.
In this post, we discuss several of the notable 401K providers, each of which have significant differences. You and your financial advisor should consider these in your choice of 401K provider, but this can only be done if you’re working with an independent financial advisor. This is a very important point: As an independent entity that is not affiliated with any investment firm, Isakov Planning Group is your fiduciary. We work with each of these 401K providers, but it is our responsibility to help you choose which is the best fit for your particular situation.
All investors want an administrator with a good track record. With national name recognition and low operating costs, it becomes clear why Charles Schwab is one of the largest 401K providers in the US. In fact, many people seeking a 401K plan put low operating costs as their top priority. The company emphasizes plans with no annual fees, and other plans have very low administrative costs. In addition, participants enjoy access to all of Charles Schwab’s brokerage and banking services.
Sometimes, employers seek simplicity above everything else. One way to simplify is to have your payroll service administer your 401K plan. Paychex and ADP can provide this combined service, coordinating with 401K providers. These nationally known payroll service companies are an excellent, affordable alternative to some of the more expensive 401K providers. They also offer human resources, insurance, and tax filing services.
Though not a plan administrator, Vanguard is one of the largest mutual fund companies. With low-cost 401K investment options, including professionally-managed mutual funds and ETFs, most investors can find a Vanguard fund or ETF that matches their needs. This includes cost-effective “target date funds,” which automatically adjust the investment portfolio with an approaching retirement date. The downside is that Vanguard does not provide customer service; instead, it is handled by a 401K administrator. In other words, if your business already has a plan administrator, most of Vanguard’s services are easily integrated. That makes it one of the least costly choices for 401K investments.
Fidelity Investments is a solid choice for companies with at least 20 employees, offering a full assortment of services, including plan administration, record-keeping, and transparent mutual fund expense ratios. Fidelity’s wide range of investment choices include ETFs, mutual funds, stocks, target date funds, and bonds. And Fidelity specializes in communicating and educating investors in making each person’s best 401K choice.
If you’re looking for flexibility, American Funds would be a good place to start your search. They offer more than 360,000 401K vehicles, including growth funds, growth-and-income funds, equity-income funds, bond funds, and balanced funds.
As you can see, there are several characteristics that distinguish these excellent 401K providers. The Isakov Planning Group works with each of these 401K providers and more. Our responsibility to you is to assess your individual situation and help you find the right 401K plan provider among the very best available. It is our job as fiduciary to do this. We are not affiliated with or owned by any of these investment institutions.
We can help you decide not only on the 401K plan provider but the approach your 401K investment should take—either as your principal retirement savings vehicle or integrated with other growing retirement assets. And don’t forget about the tax savings these investment vehicles provide!
Contact the Isakov Planning Group now to help set up a new 401K plan for 2020.