Not all 401k plans are created equal. The ratings of some 45,000 companies are certainly proof of that.
Mike Alfred may be only 28 years old, but he's already looking toward retirement and yours too. He's the founder of Brightscope, a website designed to change the way we think about our company's 401k plan.
"One of the problems we thought, it's just a lack of transparency, a lack of information available to people to make better decisions," Alfred says.
The site ranks plans on a scale of 1 to 100. Companies are rated for generosity of the company match, the quality of investment choices, and even the amount of participation of employees in the plan. Each plan is compared to others in its peer group.
"I would consider anything over 70 to be quite good in our system," Alfred says.
He says it's time for employees to stop being passive about their company's 401k plans and start demanding that employers make the plans better.
"Rather than just sitting around the water cooler and saying, 'I think the fees are high' or 'The investments aren't good,' you can actually send them some actionable information," he says. "And, we're seeing that employers are making changes based on this information."
Certified financial planner David Yeske sees some benefit to employees being more involved with their 401ks, but other than that, he doesn't see much benefit from the website for employees.
"From a retirees perspective, I frankly don't see it for a useful tool," he says.
From his perspective, he thinks it would be more useful for workers to diversify their retirement savings, remain disciplined and save.
"Your true reasonable lifestyle should be based around 90 percent of your after-tax paycheck," he says. "And, if you're spending a 100 percent of your after-tax paycheck, you're living beyond your means."
Alfred acknowledges his website is limited in scope saying, "We don't spend a lot of time to have to figure out if the average person around the country is going to get to retirement. Our primary mission is to show people how good their plans are compared to someone else's."
The website is free. So how does it make money?
Well it doesn't. Brightscope does sell software to other companies, but Alfred says he uses the website just to get his company's name out there.
