I graduated with a degree in Finance (emphasis in Financial Planning) from a Top 5 undergrad business school. I’m not saying this to boast. But rather explain that my background gives me an understanding of investments and definite opinion on what I expect from a 401k plan.
Having researched my company’s 401k plan, I found myself disappointed. The options were limited to funds with high expense ratios and average to poor returns. I spoke with the manager over our retirement plan and made three specific suggestions.
- Include at least six index funds, to include the following: Large Cap, Mid-Cap, Small Cap, International, Emerging Markets, and Bond funds.
- Change the company match from 33% on deferrals up to 6% of compensation to 100% match on deferrals up to 2-3% of compensation.
- Give employees the option to place deferrals or contributions into a Roth 401k or Roth IRA account while putting the company match in a traditional 401k.
Needless to say, my suggestions weren’t too well received. Over the next three years, I took every opportunity I could to mention my suggestions to the President of the company. We spoke about investments on a number of occasions and I demonstrated that I had knowledge and experience in the field.
A change in ownership
Several months ago, there was a change in ownership and as a result, we are currently creating a new retirement plan. After setting up a meeting with an investment advisor, our President invited three more people to the meeting: the Vice President, our Legal Counsel, and me (the marketing guy). During the meeting, we discussed all three of my suggestions. The best part, I didn’t even bring them up. Our President voiced all three of them without any prompting from me.
The point that I’m driving at is that you don’t have to settle for the retirement plan that your company offers. I have spent three years creating an internal drive for change. You can do the same.
How to go about making a change
I have detailed a few ideas on how to go about creating internal change. This list is by no means exhaustive and will not work in every situation. But these suggestions are meant as a starting point.
- Know what you are taking about. Research investment types and retirement plan options. Money Crashers offers some advice on selecting mutual funds for your 401k.
- Be prepared to make specific suggestions. No one wants to hear someone just complain. So outline exactly how you want your retirement plan to be.
- Don’t patronize or criticize. You will get no where if you simply attack the current 401k plan. Rather, when you are presenting your ideas, present them as changes that benefit everyone, including the company.
- Find a champion with influence. In my case, our President holds the same ideals and investment philosophies. I made sure to voice my concern to him. I also spoke with other employees and explained why change was beneficial.
- Be patient. If the change you are trying to make is genuinely worth it, then stay at it. You will meet opposition and you may be told no a hundred times. The creators of Chicken Soup for the Soul were told no by dozens of publishing houses until one said yes.
Don’t allow yourself to be tempted by thoughts like, “My company is too big, no one will listen.” Even as an intern, I wasn’t bashful about speaking up. Having been offered a position at the end of my internship, I approached the Human Relations department and voiced concerns about the fund options in the 401k plan. This particular company employees 1000s of people. Ultimately, I turned down the position and chose the company with whom I work now.
You are responsible for your retirement and 401k
It’s paramount that you remember that ultimately, you are responsible for creating your nest egg. So take the time now to research, understand, and actively participate in creating the best retirement portfolio possible.