401(k) Tips

How Does Your 401k Plan Compare With Others?

Understanding how your 401(k) plan compares to others is vital in knowing its value. Then, you can best decide how to save for retirement.

5 min read

Not all 401(k) plans are created equal. To stay more competitive in recruiting new employees, companies have beefed up the features their 401(k) plans offer. However, to ensure you're staying on track to meet your retirement goals, it's essential to know how your 401(k) plan compares with others.

Likewise, employers need to understand how the 401(k) plan they provide compares with other 401(k)s provided by other companies.

Keeping up with the national averages is a great way to measure various metrics. By doing so, both employees and employers can know if their 401(k) plan provides the best opportunity to build wealth for retirement.

To compare your 401(k) plan with others, look for things like automatic enrollment, fees, eligibility requirements, employer match, withdrawal and loan options, investing options, advice and guidance, and vesting schedules.

Let's look at some of the more important 401(k) plan features and what the numbers say, so you can measure how your 401(k) plan compares with others.

Automatic Enrollment

Being automatically enrolled in a 401(k) takes a lot of the work out of signing up for a 401(k). Inundated with long to-do lists, most new hires forget to enroll. Subsequently, this can lead to employees not participating in their employer's 401(k) at all.

38% of the employers that offer 401(k) plans auto-enroll their employees into the plan. Of those plans, 58% default to contributing 3% of the employee's salary.

Further, Target-Date funds are chosen as the automatic investment option in 72% of plans with auto-enrollment.

By automatically enrolling their employees into their 401(k) plan, 39% of employers claim they have higher participation rates as a result.

Average Fees

The great thing about saving for retirement early is the power of compounding interest. Your money can grow exponentially year-over-year because of this.

On the other hand, fees can drastically eat into the growth your 401(k) account sees.

Comparing your 401(k) plan's fees is essential in understanding how your plan compares to other 401(k) plans.

According to a study by 401(k) analytics firm Bright Scope, the vast majority of large 401(k) plans have fees below 1%. Smaller plans tend to be more expensive at close to 2% in fees, which may correlate to higher operational costs.

However, plans of all sizes did show fee structures below 1%.

Catch Up Contributions

If you are over 50, the IRS lets you contribute more towards retirement than the limit for younger workers. The limit to extra boost you're allowed is $6,500 per year. This is an excellent option if you haven't saved as much as you would've hoped at this point.

Almost all 401(k) plans, 98.6%, allow employees to contribute the full catch-up contribution bonus.

Additionally, 42.07% of employers offer to match catch-up contributions if they fit within the percentages to meet their match.

Company Stock Options

If the employer is publicly traded on the stock market, they may allow you to invest your 401(k) in their stock.

Though only 18.2% of 401(k) plan off this as an option, it may be worthwhile if their stock historically performs well.

Eligibility Requirements

Some employers implement a waiting period to participate in their benefits program, such as health insurance, paid time off, and even their 401(k) plan.

61% of employers report allowing their new hires to participate in their 401(k) immediately. While less than half, 46.2% immediately match their employee's contributions upon hiring.

One year is the most common length of time to wait to participate in the company's 401(k) plan. Of the 38% that don't allow immediate participation, 15% require three months or 90 days of service, 10% require six months, 11% require one year on the job, and 3% have other eligibility requirements.

Employee Participation/Contribution Rate

Having employees contribute to their 401(k)s is an excellent goal for employers to have. Larger 401(k) plans tend to cost less per person that participates.

Of employees who can contribute to a 401(k) plan through their employer, 82.6% said they do. Of those that do contribute, the average annual amount they put away is $6,940, according to a 2019 study done by Fidelity. This correlates to an average of about 7% of employees’ salaries going towards their 401(k)s.

Employer Contribution Rate

Employer contributions are the primary reason employees contribute to their 401(k)s. Free money offered by your employer to help build your retirement nest egg is an excellent incentive to contribute to your 401(k).

Of the employers that match contributions, the average match is around 3%.

According to a recent study by Vanguard, 71% of plans that match employee contributions do so at a $0.50 per $1.00 rate, up to 6%. Less common, 21% match $1.00 per $1.00 their employees contribute to their 401(k).

Adding together employee and employer contributions, about 6% of employees’ pay contributed to their 401(k)s.

Hardship Withdrawal

The IRS allows for early withdrawals of the money in your 401(k) for hardships.

However, not every employer has to allow for such early distributions. About 83% of employers allow their plan participants to take 401(k) hardship withdrawals.

Of those that are eligible, only about 4% actually withdraw money.

Investment Advisors and Advice

Having resources and professionals at your disposal can help answer questions you may have about your retirement options.

Aside from the required information plan administrators must provide, many 401(k) plans offer additional information and resources.

35% of plans offer some sort of investing advice, while 68.7% of plans retained an investment advisor.

Investment Options

The average 401(k) plan offers 19 different options for participants to invest their money.

Most common are mutual funds ranging from domestic small and large-cap equities to foreign equity holdings. Options for actively managed bond funds are also available in most plans.

Additionally, plans provide Target-Date funds as well as index fund options such as S&P 500 indexes.


Like hardship withdrawals, employers aren't required to allow participants to take out loans against their 401(k).

However, 87.8% of plans offer 401(k) loans. Of those that do, about half allow only one loan at a time. And almost all (90.1%) charge a fee for participants that do take out loans.

At any given time, about 21% of 401(k) plan participants have an outstanding 401(k) loan.

Roth 401(k)

A combination of 401(k) and Roth IRA, the Roth 401(k) adds the benefit of after-tax contributions to employer matching options.

A growing number of plans (85% as of 2019) offer Roth 401(k)s to their employees.

Roth Conversion Option

Along with offering a Roth 401(k), 54.5% of plans allow for "in-plan conversions.”

In-plan conversion allows participants to rollover their 401(k) balance into a Roth 401(k). The IRS requires participants that rollover 401(k) money to a Roth 401(k) to pay income taxes on that amount.

However, distributions from a Roth 401(k) during retirement will not be subject to tax.

Self-Directed Brokerage

A self-directed brokerage account allows 401(k) participants to select investments outside of the core offerings while staying within the plan and receiving the associated tax benefits.

About 28% of 401(k) plans allow for self-directed brokerage accounts, with another 8% considering adding them to their plan.

Safe-Harbor Plan Design

According to the IRS, a safe harbor 401(k) is similar to a traditional 401(k); however, it must provide employer contributions to be fully vested, among other things.

Safe harbor 401(k)s bypass many of the top tier rules of the Internal Revenue Code.

38% of 401(k) plans have a safe harbor option in place of ADP/ACP testing options.


Being fully vested means, you are entitled to the money your employer has contributed to your 401(k) plan. If an employee were to leave the company before their vesting eligibility, they could lose all of their employer’s contributions.

40.6% of employers that offer to match their employee's contributions immediately vest their match. While 23% profit-sharing contributions immediately.

Of the plans that don't offer an immediate vesting option, a graded vesting schedule was most common. Graded vesting is the process of employees gradually gaining ownership of the employer’s contributions.

Alternatively, cliff vesting is when an employer provides full vesting after a specific service time has been met.

Get the Most Out of Your Retirement Savings

Understanding how your 401(k) plan compares to other plans can help you make the best decision for your retirement savings.

If your company's plan falls short of specific metrics you deem essential, consider diversifying your savings strategy.

If your 401(k) plan is one of the few things holding you back from exploring other employment, comparing your plan to others can shed some light on the matter.

The important thing to remember to understand what you're investing in and how it functions. Then you can make educated decisions on how to proceed with your retirement plan.