The PBS show Frontline aired a great piece last week about 401k plans called “The Retirement Gamble.” The show exposes some of the excessive fees that 401k plan providers charge, and the lengths they go to hide them from employees and their employers.
If you are an employer or employee that thinks that your 401k plan provider may be charging to much, or you do not even know how to figure that out, you can go to www.brightscope.com to check out how your plan stacks up. Or you can contact me if you would like me to review your plan and show you some better options.
We’ve all heard the story of someone who buys a used car and then takes it to a mechanic and finds out there are all kinds of problems which are really expensive to fix. The car looked great and the salesman was really sincere. . .
Sound familiar? I often see people make big financial decisions the same way that and end up with buyer’s remorse because the did not want to take the time or spend the money to get an unbiased opinion. In many of these situations they have received the advice of a “financial advisor” but unfortunately, he was really a salesperson in disguise, just like the guy at the car dealer. All he really cared about was selling you the product (annuity, life insurance policy, mutual fund, etc.)
What you want is the mechanic, someone who can give you objective advice, that is not selling you anything, and whom you pay directly, not through the purchase of a product. Sure the advice is not free, but it’s definitely worth it.
Here is a ‘quick and dirty’ tool that I found in Money Magazine (Feb 2011), that gives you a quick assessment to see if your retirement savings are on track.
For each age there is a savings factor (e.g. at age 30 the savings factor is 0.3). This means that if you want to retire at age 65 you need to have 30% of your salary saved by age 30. If you earn $100,000 this means that you would need to have $30,000 saved for retirement. At age 50 the factor is 4.5 which means that if you earn $100,000 you would need to have $450,000 in retirement savings.
Age Savings Factor
This table is a better estimate for younger ages when retirement is far off and you want a quick reality check. As you get closer to retirement so many other specific factors could affect your number (e.g. will you have a mortgage, will you move, will your lifestyle change, etc.) that it may be worth doing a more specific sophisticated analysis, or even seeing a Fee-Only(tm) Financial Planner.