Fight for a Better Retirement Plan


Saving for retirement has never been harder. With dozens of companies giving up on pension plans and forcing their employees to manage their own retirement savings through 401(k) plans, it's up to you to navigate your path to financial security. But given that so many employers offer plans with unsatisfactory investment choices, plotting your own course can seem like an impossible task.

For workers to get the retirement benefits they want, they need to point to the successful retirement plans out there. A recent survey from the retirement plan experts at BrightScope listed its picks for the best 401(k) plans (link opens PDF file) with more than $1 billion in assets. Its findings reveal just how much you should expect from your retirement plan.

Cream of the crop
Looking at the top-ranked plans, you'll find what appears to be a fairly well-diversified list of companies. With Marathon Oil finishing at the top of the list, energy stocks represent themselves very well on the list, with seven out of the top 30 companies coming from the energy sector. Technology and health care companies as well as airlines all make strong showings as well, with financial services firms also appearing in a couple of places.

But look beyond the headlines and you'll notice something that's a bit more troubling: Many of the best 401(k) plans appear to cater to employees who are relatively well off. For instance, the Marathon plan has a very attractive match of 100% of employee contributions up to 7% of their compensation. Yet reports show that the company contributes an average of $23,000 per participant. Although some of that $23,000 likely comes from added profit-sharing contributions rather than employer matching, Marathon's employees set aside an additional amount that averages $15,000 from their own salaries, suggesting that they're earning fairly sizable salaries.

Moreover, some of the plans further down the list are specifically designed for subsets of employees. In particular, Southwest Airlines' and United Continental's United Airlines' top-ranked plans are designated for pilots.

When you look at local listings, you often see some of the same trends. In Norfolk, Virginia, for instance, medical practices and law firms took all five of the top spots in BrightScope's local look at 401(k) plans. Similarly, in Minneapolis, three law firms took top honors, although Valspar also made the list. With relatively high salaries, low turnover, and a greater reliance on profit-sharing, professional practices reward their rank-and-file employees quite well compared to businesses with more turnover.

Looking out for the boss?
The cynical view that one could take from the BrightScope results is that highly compensated top employees at professional firms are interested in deferring as much income as possible. Because of anti-discrimination provisions of 401(k) plans, they need their lower-level workers to participate in order to maximize their own deferral opportunity.

But BrightScope is more optimistic. In its press release, CEO Mike Alfred argued that by "seeing companies offering outstanding plans," companies are giving their workers "better outcomes for each and every participant who depends on their plan for a dignified retirement."

What you should do
Unless you're fortunate enough to have access to one of these top plans, the key question is what you can do to further your own retirement plan prospects. In a small company, talking to your boss about the value of a better 401(k) plan can be more successful than you'd think, especially if you can point to potential cost savings in other areas.

Worst case, sometimes fighting for a better retirement plan means making the most of your other options. Opening an IRA lets you make the investments you want without having to answer to anyone else. That may not entirely make up for a lousy 401(k) plan, but it can at least give you some control over your retirement assets.

To have success as a retirement investor, you need to find smart investments that you can't always buy in a 401(k). Check out Motley Fool co-founder David Gardner's picks by taking advantage of our free tour of his Supernova service, in which you'll discover the way David finds revolutionary stocks before Wall Street. Click here to get instant access to your personal tour, available for a very limited time.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.You can follow him on Twitter @DanCaplinger.

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