Reduce Costs and Increase Employee Engagement
The most common private, tax-favored account in America is the 401(k), which gives workers the opportunity to save money for retirement and gives employers the chance to recruit and keep workers. Nevertheless, were you aware that the fees associated with conventional service providers can be a burden on account growth?
Traditional group annuity providers, such as John Hancock, Principal, AXA Equitable, Nationwide, Prudential, Mass Mutual, ING, and Voya, are among the most well-known and have been the standard for 401(k) plans for decades.
Traditional group annuity providers like John Hancock, Principal, AXA Equitable, Nationwide, Prudential, Mass Mutual, ING, and Voya are among the most popular and have been the norm for 401(k) plans for decades; however, technology-based 401(k) platforms like July Services, For Us All, and 401Go offer companies a new and superior alternative. These platforms are more affordable, simpler to manage, and give employees a user-friendly app to track and monitor the growth of their accounts or request a distribution.
The minimal fees that technology-based 401(k) platforms charge are one of their main benefits. An employee’s retirement funds, for instance, could be significantly impacted by a 1% variation in fees for a plan with $1 million in assets and 50 participants contributing $10,000 a year.
If an average 401(k) return is 7%, the table below shows how a 1% difference in fees charged on a plan with $1 million and 50 participants contributing $10,000 per year can make a big difference in employees’ retirement savings over time.
| Years | Plan with Higher Fees | Plan with Lower Fees | Difference |
| 10 | $1,064,173 | $1,193,344 | $129,171 |
| 20 | $2,595,923 | $2,948,421 | $352,498 |
| 40 | $10,484,237 | $12,101,048 | $1,616,811 |
According to the data, participants in the higher price plan will lose $129,171 in retirement savings over a ten-year period. Participants in the higher-charged plan will lose $352,498 in retirement savings over a 20-year period and $1,616,811 over a 40-year period due to the increased fees. This emphasizes how crucial it is to properly weigh fees when picking a retirement plan for employees.
Other considerations:
Additionally, the restricted investment alternatives offered by conventional group annuity programs frequently force participants to rely on the plan’s approved investment advisor to manage plan investments. Sadly for human investment advisors, computer-based algorithms outperform them at a fraction of the cost; yet, this does not mean that human advisors are no longer required.
Although technology-based 401(k) platforms allow members the flexibility to manage their own funds and a wide selection of cost-optimized investment options. A live coach is also available to participants. Our WellthCoaches at NetWellth interact with employees on-site to provide personal risk tolerance, investment goals, and overall investment strategy guidance.
Why wouldn’t an organization switch to a tech-based platform?
Companies may worry that their employees might not have the skills to handle their finances without the help of a financial advisor. But this can be fixed with a thorough financial literacy program for staff and a wealth and wellness coach on site. Automatic calculators are also integrated into the user’s profile, enhancing their knowledge of personal finance.
Switching to a 401(k) platform that is based on technology can have more positive effects for both businesses and employees. Companies can cut back on administrative work and perhaps lengthen employee tenure. With robo-401ks, employees may access their funds more easily, pay less in fees, and earn larger returns.
As NetWellth doesn’t cross-sell financial products, our licensed WellthCoaches concentrate on giving staff members the information and resources they need to make wise choices about their retirement savings and the most effective investment approaches to increase their savings.
Why you may not have heard about tech-based or robo-401k platforms:
Some registered financial advisors might not want to suggest a switch to technology-based 401(k) systems because they don’t want to lose clients or money.
Additionally, the advantages of technology-based 401(k) platforms may also be unclear to some registered financial advisors. They could feel more at ease continuing with conventional techniques that they are accustomed to and have previously employed.
Finally, it’s possible that some financial advisors will only act in their own financial interests. Traditional group annuity plans often pay commissions in addition to the percentage fee charged by the advisor. Technology-based 401(k) platforms have greater fee transparency, which might mean lower pay for advisors.
In conclusion, your financial advisors might be hesitant to suggest that you switch to technology-based 401(k) platforms, but these platforms have benefits that can’t be ignored. Employers can give their employees more value and make the workplace a more productive and loyal place by lowering prices, being more open, making things easier to get to, and teaching employees about money.
Employers can make sure their employees are ready to make smart investment decisions and improve their health as a whole by putting in place a thorough financial literacy program for employees, like the ones offered by NetWellth. To book a 30-minute consultation, click here.
- American Benefits Council – https://www.americanbenefitscouncil.org/
- NetWellth – https://netwellthbenefits.com/
- Employee Wealth & Wellness Coaching – https://netwellthbenefits.com/wealth-wellness-coaching/
- Department of Labor – https://www.dol.gov/
- Robo 401k – https://www.401go.com/
- Robo 401k – https://www.julyservices.com/
- Betterment – https://www.betterment.com/
- Wealthfront – https://www.wealthfront.com/