The Most Common 401k Features

I found this piece on the most common 401k features interesting. In particular, these facts stood out to me:

Among those with fixed matches, the most popular formulas are 50 cents per dollar up to the first 6 percent of pay (26 percent of plans), one dollar for every dollar up to the first 4 percent of pay (10 percent), and dollar for dollar up to the first 3 percent of pay (8 percent).

Mine is dollar for dollar for the first 3%.

The typical plan has approximately 65 percent of assets invested in equities. Top investments are actively managed domestic equity funds (29 percent of assets), indexed domestic equity funds (10 percent), stable-value funds (9 percent), and balanced stock/bond funds (8 percent).

I'm almost all in equities. Index funds, of course.

Most eligible employees (82 percent) have some kind of balance in their 401(k) plan. Pretax participant deferrals average 5.6 percent of pay for non-highly compensated workers and 7 percent for highly paid workers.

I certainly have a balance in mine. :-)

How about you? How does your 401k compare?

Comments

[Kevin]

Count me in the group that has the Roth option (which I use). I wish we had index funds, though I guess our American Funds aren't too bad with expenses right around 1%.

[Mike]

Mine has dollar for dollar for the first 6% with a Roth option for when you exceed the Federal contribution cap.

[susan]

Ours is 50 cents match for each employee dollar invested - with an annual cap on the match of $2000. So it's not great, but it's $2000 more than nothing. :)

We have decent investment options - about 15 funds to choose from.

[Ryan S]

I get a free 1% without even putting anything in. Then I get 100% matching for the next 3%, and 50% matching for the next 2%.

I put in 8%, and get the full 5% matching, for a total of 13% of my income going in. I plan to raise my contribution to 9% in January (after cost of living increase), and 10% in June (after annual raise).

[CommRE]

My plan is dollar for dollar on the first 3%, then 50 cents on the dollar for the next two percent. So if you kick in 5%, you get 4%. I contribute 15% of my pay, so I get 19% total.

[Matt]

My plan is a bit strange. We get 50 cents match per dollar invested for up to 7% of our income. Plus UP TO another 50 cents match depending on company performance. We’re currently totaling 92 cents match per dollar invested…..It has averaged about 88 cent match since I started working here 7 years ago.

It’s a pretty good selection of about a dozen or so funds.

[kentuckyliz]

Matt, that's interesting...incentivizing.

I'm in a 403b...I contribute 5% of my gross salary and my employer contributes 10%. Peachy deal. I haven't seen double matches anywhere.

My previous employer, I contributed 5% and they contributed 6%, so it was just a tad more than even.

I use TIAA CREF stock funds.

That "required" part of the plan is pre-tax. I can do additional contributions of $15,500 EACH into voluntary additional plans--403b and 457. However, I couldn't really afford to live if I contributed $31k of my income. At least the 403b can be pretax or Roth, not sure about the 457.

I recently restarted the voluntary additional contributions to a Roth 403b. My first contribution was Sept. 15--and what a crazy week, huh? I've ridden ups and downs in the market before and will again.

I also have a non-employer Roth IRA and made my contribution for the current year.

Beyond my core mandatory pretax holdings, my other stuff is in target date retirement funds.

[Mark]

A more interesting point would be to see what the average balance in a person's 401K is. I realize it will differ for a person in the work force 5 years vs. 25 years, but from what I have seen the average balance is still lower than most people would think.

[Kevin]

Mike - how does your Roth option only kick in over the Federal cap? You can't contribute more than the statutory limit regardless of pre- (regular) or post-tax (Roth).

[tom]

I'm actually pretty luck to have 75% match up to 8%. I put in the 8% and get the 6% match for 14%.

I would like to increase that as soon as I get my next promotion or raise.

[Traciatim]

I'm in Canada so mine is an RRSP, but my company does a 100% match up to 6% of income. We have a pathetically small selection of just 5 funds to choose from. They each have a 0.9% expense fee, except the bond fund is 0.6%. A funny thing is though, to make it look like a choice they also offer three different 'Life Plan' options that look like other funds, but if you look at the info sheet they are simply pre-determined mixtures of the previously mentioned 5 funds. What's even better is that these life plans all include the bond fund, but their expense fees are also 0.9% instead of lower by the relative amount of the bond fund. So, anyone in their right mind who wanted the mix would just look at the sheet and pick the mixture of the 'life plan' they wanted in order to save on fees.

I wonder how many people chose the 'life plan' funds though just out of convenience.

[Stephanie]

We've got 100% matching of the first 4%. There's also a plan that seems kind of like a pension plan, but it's not vested for 3 years...the 401(k) match is vested immediately, though.

[Mark]

DuPont, managed by Merrill Lynch, gives 100% company match up to 6%, plus 3% company match of all monthly income, which is part of automatic enrollment, vested after 1-year, no-fee, and no ROTH. Two outstanding loans at a time, max $50,000, with $250 fee to open. Funds include REITS, Stable Value, and DuPont stock. This changed as of Jan 2008, as pensions for new hires were eliminated.

[Trevinsky01]

I get $1.50 match for every $1 contributed up to the first 4%. The fund selection in pretty good too.

Our plan just got changed this year (for those hired before 2005) to compensate us for our pensions' being frozen at the end of last year's levels. Current rules are:

- participants in original defined contribution pension plan get 100% match on first 6% plus additional 4% free company contribution. This category includes those who were at least 40 in June 1999 and had at least 10 years of service and chose to remain in the original pension plan in 1999.

- participants in "cash balance" pension plan get 100% match of first 6% plus company contribution of 2%. This group includes those hired before 2005 who didn't make it into the first group.

- those hired after 2005 get 100% match on first 5% plus company contribution of 1%.

Those in first two groups will still get whatever pension benefits they had at the start of 2008.

As to 401K, we have Roth option; good selection of 15+ funds; can also chose from a number of actual mutual funds like several Vanguard funds, several Fidelity funds, etc. I have about 60% in equity funds and 40% in stable value and bonds. I just started to put a little bit of new money into REIT and international REIT; also in a mutual fund that invests in Brazil. Pretty small amounts of money in those now, not serious.

I've been contributing forever, but when I was young I only contributed up to company match (before the change it was 50% on 6% match for those with pension plans); in recent years I've been maxing it out. So yes, I have money there. Unfortunately, I was a bit too conservative in my allocation when I was young, even more conservative than now and missed out on some really great years of the stock market. But hit bad years of 2000s... Currently contributing the max to regular 401K - really need to take $15500 off my taxable income.

[Luke]

I just entered the working world in June, but I landed in a great company. We get 7% in our 401k, 100% free. In addition to that, we get a guaranteed 3% in company stock, but in the past it has always been between 6% and 8%.

[Josh Stein]

My company's offerings aren't very good. I put in the 6% to get the half-match, but the only offerings are actively-managed funds; the advisor being a buddy of the top guy in the company.

So next year, when he comes down to our office, I'll again ask him "why are the fees so high? These investments didn't do any good again." Only now that I've got more experience, I'll be letting the HR Director know of my displeasure as well.

[Peter]

Mine has also dollar for dollar for the first 6% with a Roth option (in case you want to exceed the Federal contribution cap).

[Todd]

Dollar for dollar match up to 7% plus up to 10% of salary from profit sharing. 17% total. Makes it very easy to save a big portion of everything I make.

[cmadler]

One of the oddities of financial services is that most retirement plans (403(b), 401(k), etc.) are selected by employers to be used by individuals, and the elements that an employer likes when they're selecting a provider are not necessarily the elements that the individual participants would look at. For example, in 4 different group retirement plans, I think I've only seen one or two index funds; most included funds, regardless of the asset class, tend to be actively managed. It's an opportunity for the provider to make some money from a captive client base.