How AI can help you assess how competitive your 401(k) retirement plan is
Technology is marching ever onwards and you can use it to your advantage when benchmarking your retirement investments against peers.
The IRS recently announced updates to 401(k) retirement plans, specifically the contribution limit. For 2024, the contribution limit will increase to $23,000 and $30,500, though the latter is just for people aged 50 and older.
Though the increase is a quarter the size of the increase for 2023, the burgeoning limits pose an important question for people aiming to get the most out of retirement. Unlike a traditional pension, there are no guaranteed returns for a 401(k) plan so ensuring you have the greatest chance of a good return is paramount.
The main way workers, advisors, and providers can do this is through benchmarking, basically comparing 401(k) plans with similar peers. Utilising artificial intelligence, Raul Valdes-Perez has created a tool to quickly and simply benchmark your retirement fund against others using publicly available data, called BenchMine.
“The goal is to help drive performance improvement,” Valdes-Perez said.
What are the practical applications of the tool?
The federal government requires large plans to publish their data, meaning Benchmine has access to around 60,000 plans. On the website you can choose the size of the employer 401(k) plan, which takes you to another page where you can use a Benchmarking Engine as well as a Comparison Engine. This enables the users to compare 10 plans side-by-side.
Another option is to use the Discover tool to find plans that fit your parameters, such as the size of employer contributions, and the value of interest amongst others. Valdes-Perez explained that this gives users great ability to optimise their retirement plans.
“The mission is to make a social impact, to bring unprecedented levels of transparency to this sector,” said Valdes-Perez. " The main goal is to become the gold standard in benchmarking, or better known comparative performance analytics across the entire world.”
The tool is written in good-quality English, giving useful feedback to users. The company trademarked the phrase, A sentence is worth 1,000 data, emphasising the stock put in the importance of this accessibility.
“No human beings never come up with these outcomes,” he explained. “But if you automate it, and you program the software to look for insights, bang, you have innovation.”