You’ve probably heard that a 401k is a great way to save for retirement, especially when working with some of the best 401k companies. But what exactly is it? And how can you get started?
401k plans are employer-sponsored retirement savings plans that allow employees to contribute a portion of their pre-tax income toward retirement savings. When choosing the best 401k companies, there are several factors to consider, including fees, investment options, employer contributions, and customer service.
In this article, we will highlight some of the best 401k companies and the factors that make them stand out. We would also let you know how 401k works, so you can know how to get started.
Don’t stop reading to enjoy the juicy information we have compiled for you!
How Does A 401k Work?
A 401k plan, once established, goes through a period of tax-deferred growth before the employee retires. The summary of the lifespan of a 401k plan as offered by some of the best 401k companies is in these four steps:
- Firstly, your employer provides a 401k plan as part of your benefits package. You join the plan and choose your underlying growth investment based on your time horizon and risk tolerance. Self-employed individuals can also set up an independent or solo 401k plan.
- You contribute pre-tax funds directly from your paycheck to the 401k plan. Your employer may also match or pay an additional percentage of your contribution. (More employers now offer Roth 401k plans, which allow you to contribute after-tax dollars.)
- The funds are then invested in your underlying portfolio, and earnings may fluctuate per the performance of the investment over time. Contributions and wages in a qualified retirement plan grow tax-free until withdrawal.
- You may begin withdrawing funds from the plan to use as retirement income once you reach the age of 59 years. You are to pay income taxes on your withdrawals at that time. Depending on your birth year, you must begin taking required minimum distributions at either 70 or 72 years.
15 best 401k companies to work with in 2023
Here’s a breakdown of the15 best 401k companies that you might want to consider:
- Fidelity.
- Charles Schwab.
- T. Rowe Price.
- Vanguard.
- Principal Financial Group.
- J.P. Morgan Chase.
- BlackRock.
- American Funds.
- MassMutual Financial Group.
- Putnam Investments.
- John Hancock Retirement Plan Services, LLC.
- Nationwide Mutual Insurance Company.
- New York Life Insurance and Annuity Corp. (NYLIAC).
- Empower.
- ADP (Automatic Data Processing).
#1. Fidelity
Fidelity is one of the best 401k companies to provide you with the best 401k benefits. This company offers excellent retirement plans and has a user-friendly website, app, and culture.
Their 401k plan is unprecedented, as it includes stock options, which can be lucrative if you hit your target numbers or goals early in your career. When you join, you’ll also get free access to their investment advisory services, as well as access to company shares after three years of working with them.
They have a 401k website which has everything you need at your fingertips, so no matter what time zone you are in, you can access it.
#2. Charles Schwab
Charles Schwab is one of the best 401k companies to work with in 2023. It has an excellent reputation for customer service and offers competitive plans that are easy to understand, which makes it easier for employees to invest their money correctly.
Charles Schwab offers an attractive investment portfolio, including low-cost index and exchange-traded funds (ETFs). ETFs allow you to invest in multiple assets at once without having to manage them yourself—you can buy an index fund that tracks an index like the S&P 500 or Nasdaq 100 without knowing all those different stocks.
Another advantage of working with them for your 401k plan is that there is no minimum deposit required to open an account or service fees for account maintenance.
#3. T. Rowe Price
T. Rowe Price Group, Inc. is a publicly traded global investment management firm based in the United States that provides funds, sub-advisory services, separate account management, and retirement plans and services to individuals, institutions, and financial intermediaries.
As of 2020, the firm has over $1.6 trillion in assets under management and $6.2 billion in annual revenues, ranking it 447 on the Fortune 500 list of the largest U.S. corporations.
The company, founded by Thomas Rowe Price, Jr., has been providing retirement advice since 1937.
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#4. Vanguard
Vanguard is a mutual fund company, the largest in the world. It is one of the top 401k companies.
They have a low expense ratio, which means that you will save money on your investment with them. Vanguard is not a publicly traded company.
The people who invest in their funds own it. As an owner, you have access to personalized financial advice, high-quality investments, retirement tools, and market insights that will assist you in creating a future for those you care about.
Their fees are significantly lower than those of other companies, as well as those of any other mutual fund company.
#5. Principal Financial Group
It began as an insurance company in 1879. They are now a FORTUNE 500 company and a global leader in investment management and one of the top 401k companies.
Financial professionals and clients turn to them for the best solutions and assistance in achieving their financial objectives. But that isn’t why they’ve come.
What they do is assist people in living the lives they desire, empowered by financial security and stability .
#6. J.P. Morgan Chase
J.P. Morgan Chase & Co. is a New York-based financial services firm. JPMorgan Chase is one of the largest banks in the United States in terms of assets, and it has a prestigious reputation as an employer and an industry leader.
The company also provides 401k plans to its employees via its active management portfolio funds, which are managed by investment professionals from all over the world. JPMorgan’s plan has low fees, low expenses, and high returns.
It has consistently outperformed most other major Wall Street companies in America.
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#7. BlackRock
BlackRock is one of the best 401k companies, a global investment management company that manages over $10 trillion in assets. They are one of the largest asset managers in the world and have over 12,000 employees worldwide.
It also holds bragging rights as one of the top 401k companies worldwide. Robert S. Kapito, Larry Fink and Susan Wagner founded the company in 1988.
Initially, BlackRock operated as a risk manager and fixed-income institutional asset manager. Since then, they have expanded significantly by providing various types of funds for both individuals and institutions, such as 401k plans and hedge funds that can be used for retirement planning.
BlackRock has 70 offices in 30 countries and clients in 100 countries worldwide. BlackRock, along with Vanguard and State Street, is regarded as one of the Big Three index fund managers that dominate corporate America.
#8. American Funds
American Funds is a subsidiary of Capital Group. Capital Group provides various active management products, including more than 40 mutual funds through its subsidiary, American Funds Distributors, as well as separately managed accounts (or collective investment trusts), private equity, and investment services for high-net-worth investors in the United States.
They also provide various products for institutional clients and individual investors worldwide.
American Funds is a mutual fund company that offers a broad range of investment products. They are also one of the top 401k companies, with over $4 billion invested in its funds.
#9. MassMutual Financial Group
MassMutual Financial Group, headquartered in Springfield, Massachusetts, is a Fortune 500 company. Life insurance, annuities, and mutual funds are among the financial products and services provided by the company.
In terms of 401k plans, MassMutual is one of the best 401k companies available to employees at large organizations such as the United States Postal Service (USPS), General Electric Co., Pfizer Inc., AT&T Services Corp., Xerox Corp., and others.
MassMutual ranks 100th on the 2022 Fortune 500 list of the largest corporations in the United States by total revenue . The company has $10.7 billion in revenue and $312 billion in assets under management (as of 2022).
The company employs over 7,000 people in the United States and a total of 10,614 people worldwide.
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#10. Putnam Investments
Putnam Investments is a global asset management firm with over 80 years of experience serving individuals, institutions, and retirement plan sponsors across various strategies. They invest actively, conduct extensive research, and embrace innovation, all motivated by a commitment to their clients.
Among their diverse investment offerings are advisor-sold mutual funds, managed accounts, and model portfolios; investment options for 401ks, IRAs, and other retirement plans; ETFs; variable annuities; and institutional portfolios. Putnam primarily distributes its services through offices and strategic alliances in North America, Europe, and Asia.
#11. John Hancock Retirement Plan Services, LLC.
John Hancock Retirement Plan Services, Inc. is a subsidiary of Manulife Financial Corporation and is one of the largest providers of retirement plans to small and mid-sized employers. It is also considered one of the best 401k companies as it has over 1 million participants in its plans across all 50 states, with more than $200 billion in assets under management at the end of 2018.
John Hancock provides three types of 401k accounts: traditional, Roth, and SEP-IRA accounts, as well as additional features such as automatic enrollment and no-cost investment options (which can be useful if you’re just starting).
#12. Nationwide Mutual Insurance Company
Nationwide Mutual Insurance Company is a Columbus, Ohio-based financial services firm. Founded in 1926, it has annual revenue of more than $1 billion.
Nationwide provides 401k plans for private sector employees and state government employees, as well as various other retirement products such as annuities, variable life insurance policies, and variable universal life insurance policies (VUL).
Nationwide is one of the best 401k companies among large employers because it allows participants to invest up to 100% of their salary without incurring any additional fees or commissions from the brokerage firm managing their accounts.
During retirement planning, Nationwide makes it easy for employees who don’t have much time left on their hands after work.
The employees can seek investment advice from an independent advisor before deciding how much money they should invest.
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#13. New York Life Insurance and Annuity Corp. (NYLIAC)
New York Life Insurance and Annuity Corp. (NYLIAC) is a great company to work for. It has a 401k plan that is easy to navigate, and the benefits are generous enough to make it worth investing in your retirement savings.
It is ranked as the third-largest life insurance company in the United States, the largest mutual life insurance company in the United States. It sits at 67 on the 2021 Fortune 500 list of the largest corporations in the United States in terms of total revenue.
If you are looking for a place to invest in your future, NYLIAC is one of the best 401k companies for you.
#14. Empower
Empower is a subsidiary company of the Great-West LifeCo. Empower, headquartered in metro Denver, Colorado, is the second-largest retirement plan recordkeeper in the United States in terms of total participants.
Empower serves the employer-sponsored retirement plan market, including government 457 plans, small, medium, and large corporate 401k clients, nonprofit 403(b) entities, private-label recordkeeping clients , and IRA customers.
Empower takes great pride in assisting people with saving, investing, and advice, as well as providing them with the tools and resources they require to achieve their financial objectives.
Empower’s sole mission is to assist Americans in achieving the future they envision. This mission begins with providing advice, personalized guidance, and critical support.
#15. ADP (Automatic Data Processing)
ADP’s 401k plans include investment options from over 300 asset managers. Participants can choose from three investment line-ups based on their experience with investing and financial assets.
ADP specializes in payroll, tax filing, human resources, insurance, and administrative services in addition to retirement plans. ADP’s small business division (1 to 49 employees) integrates payroll and recordkeeping with 401k plans, which is a significant benefit for small businesses.
Employees with 401k plans can transfer them into the new plan, and a mobile app allows employees to check their retirement accounts from their smartphones and other devices.
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Is The 401k A Good Investment?
Many people regard their 401k as nothing more than a retirement account. When working with some of the best 401k companies, 401k can be much more.
To begin with, 401k provides tax advantages that other investment options do not. Employee contributions to a traditional 401k are made with pre-tax dollars, which means they are not subject to income taxes.
Furthermore, employer-matching contributions are tax-free. 401k also grows tax-deferred, which means you won’t have to pay income taxes on any investment gains until you withdraw funds from your account. This can be a significant benefit, particularly if your investment portfolio has performed well over time.
In addition to tax advantages, 401k allow for employer-matching contributions. If your employer matches your contributions, it’s free money that you can put toward your retirement savings. Employer-matching contributions can be a powerful tool for accumulating retirement savings, so take advantage of it if your employer provides it.
Generally, 401k is a great way to save for retirement while receiving tax benefits. If you have the option to participate in a 401k, you should do so.
What Are The Alternatives to 401K?
Numerous retirement savings plans are available; the best one for you depends on your specific circumstances. IRAs, pension plans, and annuities are some other popular retirement savings plans.
- IRA: An IRA (Individual Retirement Account) is a self-directed retirement savings account. Traditional and Roth IRAs are the two main types of IRAs. Traditional IRA contributions are made with pre-tax dollars, and the money is subject to income taxes when withdrawn in retirement. However, contributions to a Roth IRA made with after-tax dollars grow tax-free and you do not have to pay income taxes on it when you withdraw it in retirement.
- Pension: A pension plan is an employer-provided retirement savings plan (defined contribution plan). Pension plans are becoming less popular, but some employers continue to provide them. First, your employer makes a pension contribution on your behalf. When you retire, the pension plan will pay you monthly based on your years of service and salary.
- Annuity Deferred: A deferred annuity is a type of insurance used to save for retirement. An annuity allows you to make unlimited contributions to it over time. The money grows tax-free, and you can begin withdrawing it when you reach a certain age (usually 59 and a half).
- Indexed Universal Life Insurance (IUL): Indexed universal life insurance is a permanent life insurance policy that can also be used to save for retirement. You contribute to the policy over time with indexed universal life insurance. The money in the policy grows by the performance of an index, such as the S& P 500. Furthermore, you can begin taking tax-free withdrawals from the policy at 59 and a half years, and the death benefit paid to your beneficiaries is tax-free.
Conclusion
Since the 401k market is so competitive, you want to find a company that will work with your goals and needs. This article can help you with that. We hope you found some of the best 401k companies that fit your goals.
Frequently Asked Questions
Lower-risk investment types can help your 401k retain its value, but remember that lower risk usually means lower returns. Bond funds, money market funds, index funds, stable value funds, and target-date funds are all low-risk 401k investments.
A 401k advisor’s salary ranges between 0.5% and 1%. However, the fees charged by advisors vary greatly, with some charging up to 7% and others charging as little as 0.05%. They charge a percentage of the assets they manage, with the amount charged decreasing as advisors manage more assets.
Increasing your contribution limit by 1% per year in just five years can double your 401k balance. You can still use this strategy if your employer does not provide the feature or if you want to increase your contribution level significantly. You will have to increase your contribution amount manually each year.
The 4% rule is a commonly used rule of thumb for retirement spending. It’s fairly straightforward: add up all of your investments and withdraw 4% of the total during your first year of retirement.
Your employer can withdraw funds from your 401k plan after you leave the company, but only under certain conditions. Your employer can cut you a check if your balance is less than $1,000. If your credit is between $1,000 and $5,000, your employer can transfer the funds to an IRA of the company’s choosing.
References
- thebalancemoney.com – Best 401k companies in 2023.
- forbes.com – Best 401k plans.
- gobankingrates.com – Companies with the best 401k plans.
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