Chapter 15. Determine How Good Your Company Retirement Plan Is

One of my close friends, a single mom, held various part-time jobs throughout her career, living frugally but always struggling to make ends meet. Now that her daughter is grown, however, she's been able to obtain full-time work in a field that she's passionate about, assisting in a veterinary clinic. Not only is she able to spend her days nurturing the animals she loves, but she's also enjoying full-time benefits for the first time in her working life, including a solid health-care plan and the opportunity to contribute to a 401(k).

As I helped her review the options available in her new retirement plan, I was struck by how little information the investment provider had made available. All my friend had to go on were the fund names, their general objectives (for example, "Growth"), and their one-, three-, and five-year returns. There were no manager names, no expense information, no clues about whether the funds buy stocks of tiny, risky companies or bonds issued by the U.S. Treasury.

Unfortunately, retirement plan participants are often flying blind when it comes to evaluating their plans and selecting investments. There's no easy way to evaluate the quality of a plan overall, and some of the administrative costs associated with retirement plans are buried in a document called the Summary Plan Description that's available only on request by participants. In addition, some plans provide very little information about the ...

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