6 best 401(k) retirement plan providers of 2023

A 401(k) is a popular tax-advantaged, employer-sponsored retirement savings plan that allows employees to contribute a portion of their pre-tax (or in certain cases, after-tax) earnings to grow their retirement savings. For small business owners, offering a 401(k) plan can be a valuable employee benefit, helping to attract and retain top talent.

Numerous financial institutions offer 401(k)s, and choosing the right provider ensures a smooth and efficient experience for employers and employees. This article will help you choose among popular 401(k) retirement plan providers by reviewing the top companies in the industry and what they offer.

Criteria for Ranking the Best 401(k) Providers

Our ranking of the best 401(k) providers is based on three critical account and service features:

1. Fees: The cost of plan administration, investment management, and other associated services. These can vary depending on the brokerage and can make a difference in an individual’s lifetime returns and savings.
2. Investment options: The variety and quality of investment choices available to plan participants. Unlike IRAs, 401(k)s offer only a limited set of investment options to plan participants, and we considered this in our rankings.
3. Customer service: The responsiveness, knowledge, and helpfulness of the provider’s customer support team are critical factors in anyone’s experience with the account.

Our Top 401(k) Providers

In no particular order, we consider the following 401(k) providers as standouts among their competitors in terms of their fee structures, investment options, and customer service quality.

Vanguard

Vanguard is a leading investment management brokerage that stands out for offering low-cost, high-quality 401(k) plans for businesses of all sizes, with a reputation for excellence in the industry.

• Fees: Overall, their fees are competitive, but specific fees vary depending on the company’s plan and individual investments; you’ll need to contact them directly for a quote. Their investment options generally offer lower expense ratios relative to competitors in the industry, including a total stock market index fund with a 0.02% fee.
• Investment options: Vanguard provides a comprehensive range of investment options, including hundreds of Vanguard mutual funds, 12,000+ third-party funds, and ETFs. They are known for offering exceptionally low-cost passively managed index funds, low-cost target-date funds, and affordable options in their Admiral share class.

• Customer service: Vanguard customer service is known for being responsive and helpful to all plan participants. It has robust online platforms and apps that make it easy to track and automate your finances.

Fidelity Investments

Fidelity Investments is a well-known financial service provider with a strong focus on retirement planning. They currently serve over 30 million plan participants who have trusted the reputation of Fidelity’s advisory services, financial professionals, and financial advisors. They boast that over 85% of their clients are businesses with fewer than 500 employees, making them suitable to serve small to medium-sized enterprises. They even offer safe harbor 401(k) options.

• Fees: Their fees can vary, but according to Forbes, most employees will see a fee of $25 per quarter plus a quarterly charge of 0.125% of assets under management (AUM), and employers or plan sponsors will see administrative costs of around $300 per quarter.
• Investment options: Their 401(k) plans offer various investment options, from proprietary mutual funds to target-date funds, catering to various risk tolerances and investment preferences. They claim to have over 16,000 mutual fund options.

• Customer service: Fidelity’s customer service team offers technical support over the phone or online, and they have a seamless app and online dashboard where you can manage your finances. There are also options to meet with their financial advisors if you need access to additional expertise.

Human Interest

Human Interest offers low-fee and easily accessible 401(k) plans with diversified investment options and exceptional customer service. While not as large as some of the other providers in this list, Human Interest focuses on plans for small and medium-sized businesses and has grown rapidly. Overall, Human Interest delivers a strong 401(k) service at competitive prices through technology and automation, while maintaining strong levels of customer service.

• Fees: Human Interest offers a transparent pricing model that starts at $120 + $4 per employee per month, details of which are readily available on their website. They also offer a competitive average employee fee of 0.50%, significantly lower than the industry average of over 1.50% for small and medium-sized plans. Human Interest has also eliminated transaction fees, such as those levied during life events like divorce or job changes.
• Investment options: Human Interest offers employees model portfolios that automatically invest in low-cost mutual funds and rebalance quarterly, as well as low-cost index funds with an average asset-weighted fee of 0.07%. They also allow employees to get an even more customized portfolio by going through a Risk Tolerance Questionnaire or by choosing from thousands of available funds.

• Customer service: The company has earned multiple awards for its customer service, including the TrustRadius Top Rated Badge of 2023 and the American Business Awards – Silver Stevie. Their U.S.-based support team claims to answer 97% of incoming calls within 30 seconds.

Charles Schwab

Charles Schwab is a leading brokerage and financial advisory firm that specializes in retirement plans like 401(k)s. If robo-advisors aren’t for you, this could be a good option as they pride themselves on offering personalized advice and monitoring — this can ultimately help you with your financial plan design.

• Fees: Schwab’s fees vary based on each business’s needs and their chosen account types. Furthermore, individual fees will vary based on investment options.
• Investment options: Charles Schwab also offers investors a range of mutual funds and ETFs, but they don’t advertise their more expansive offerings as much as other brokerages.

• Customer service: With many options for actively managed funds working with financial advisors, you’ll have increased access to professionals who help with your plan assets. Beyond that, their general customer service is strong as they take their fiduciary duty seriously. They are generally less focused on their apps and mobile platforms than Fidelity and Vanguard.

ADP

ADP, a global provider of human capital management solutions, offers comprehensive 401(k) plans focusing on customization and flexibility. They offer three tiers of 401(k) plans: Essential, Enhanced, and Premiere, each with varying benefits and features. ADP takes a uniquely transparent approach to its plan benefits, costs, and features. They provide support for safe harbor, profit-sharing, and other plan designs.

• Fees: According to Forbes, employers can expect $160 administrative costs on standard plans, and employees will see a 0.10% fee on covered assets, subject to a minimum fee of $20.83 per month, plus a $4 monthly participant fee. Their website has a calculator you can use to estimate costs.
• Investment options: They give access to 13,000+ investment options from over 300 investment managers.

• Customer service: They also integrate with payroll, which can be convenient for many employers looking to connect with a single plan administrator. Their mobile app makes getting customer support and tracking your financial progress easier. With Enhanced or Premier plans, you’ll benefit from personal relationship managers or financial advisors.

New York Life Insurance Company

New York Life, a prominent insurance company, offers 401(k) plans tailored for small and medium-sized businesses. Their reach within the 401(k) industry isn’t as broad as others we’ve mentioned, but like many of the bigger names, they offer dedicated customer support.

• Fees: New York Life’s fees depend on the investments inside your plan and are disclosed when you contact them to discuss 401(k) administration.
• Investment options: They provide various investment options, such as target date funds, core funds with balanced bond and equity funds, and fixed dollar options.

• Customer service: Their customer service is known for being supportive and focused on the financial wellness of each customer.

Comparison of the Top 401(k) Providers

Each of the top 401(k) providers has strengths and weaknesses. For example, Vanguard and Fidelity Investments are known for their low-cost investment options and extensive resources for plan participants. Charles Schwab and ADP excel in their customization options and responsive customer service, while New York Life offers tailored solutions for small and medium-sized businesses. Each has varying setup fees.

To help you choose the best provider for your needs, this comparison chart will show the fees, investment options, and customer service associated with each investment management firm.

So how do you choose which option is best?

Ultimately, the right provider will depend on your circumstances, such as your business size and industry, pricing needs, employee benefits goals, need for financial advising, and preferences around investment options.

FAQs:

What is a 401(k) plan?

A 401(k) plan is a tax-advantaged retirement savings plan offered by employers, allowing employees to contribute a portion of their pre-tax (or in the case of a Roth 401(k), after-tax) earnings toward their retirement savings. Employers may also match employee contributions to a certain percentage, enhancing the savings rate.

How do I choose the right 401(k) provider?

To choose the right 401(k) provider, consider factors such as fees, investment options, and customer service. You should also assess the provider’s reputation, plan designs, and the level of support they offer for plan sponsors and participants.

Can I have a 401(k) with multiple providers?

While having multiple 401(k) accounts with different providers is possible, it may not be the most efficient or effective way to save for retirement. Consolidating your accounts with a single provider through a rollover can make managing your investments easier by potentially reducing fees, and streamlining your overall retirement planning process.

How much should I contribute to my 401(k)?

The amount you aim to contribute to your 401(k) depends on your individual financial situation and retirement goals. Many financial professionals recommend contributing at least enough to receive your employer’s full matching contribution, if you have one available. Beyond that, consider your age, income, and retirement objectives to determine an appropriate contribution level. Remember that contribution limits are outlined by the IRS ($22,500 in 2023 if you’re under 50; $30,000 if you’re 50 or older).

Can I withdraw money from my 401(k) before retirement?

In most cases, you can’t withdraw money from your 401(k) before age 59 1/2 without incurring ordinary income taxes and an early withdrawal penalty tax penalty. However, some exceptions exist, such as those for financial hardship, disability, or specific first-time homebuyer provisions as outlined by the IRS.

Need Help Rolling Over Your Old 401(k) Plan?

Choosing the right 401(k) provider can impact the fees you pay, the investment options you can access, and the level of customer support you receive. There are many factors to consider before selecting an investment company to sign up with.

When you need help finding your old retirement accounts, consider working with Capitalize. We are here to help you find and roll over old retirement accounts so you can stay on top of your financial future.

Learn more about Capitalize and how we can help you with your retirement goals.