Show HN: A paperless 401k with automated advising built-in
captain401.com
captain401.com
Captain401 is designed to make both sides of the 401k experience as pleasant as possible. We offer paperless administration to employers and automatic ("robo") advising to employees. We hope a tool like this will bring retirement savings to startups that had previously considered themselves too small or too busy for a 401k.
We're especially interested in hearing from HNers who run their own business: have you set up a 401k plan for your employees?
What does this mean, that the robo advisor is based off of decades of Nobel Prize winning research? Eg - Long Term Capital Management had Nobel Prize winning Laureates guiding its investment strategy and it went bust in the late 90's as its models broke down due to market conditions outside the realm of its models.
Also - how does your fiduciary duty obligation jive with your robo advisor, which I assume is an automated process? Are you manually checking each bit of advice it suggests as part of due diligence requirements? And what happens if it has bugs? Eg, if I'm a risk averse investor but your robo advisor had some buggy code and recommends I put 90% of my portfolio into emerging market equities, and I follow this erroneous advice and lose most of my investment, what recourse do I have against your company? Do you guarantee lost capital due to clearly wrong advice, or do I have to take you to court? Just curious how you are planning to deal with this type of situation, because at some point it's likely to happen (but maybe not as obvious as this example).
Also your link appears to be more of an opinion piece than purely factual statement on 401k advisors.
The photos on the website make you guys look pretty young and if I were an employer I'd be nervous that --like many start-ups-- one day out of the blue I'd get an email saying Captain401 is closing. Not that youth means the start-up is doomed, just that you may want to move on to try something else. I'm sure your plans can roll over easy enough, but that just means I'll have to deal with Fidelity/Vanguard/etc anyway.
That said, we do think youth has its advantages, esp. in a stodgy industry like finance -- some of most exciting fintech companies were started by young founders (ex. Stripe, Betterment, etc.).
The last startup I co-founded, I was at for 7 years. I plan to be at this one for 10+.
Thanks.
Never been able to find this information online, figured I'd ask in this thread, but apologies if this is all blindingly obvious. Would be happy to RTFM if someone could point me to the M.
Everywhere I've worked so far has both let me keep the existing account if I wanted when I left, and then also provided the option to rollover an old account into the new plan. Basically you fill out a form, send it to whoever the old account was with, and then get a check you can deposit in the new account through your new employer (or maybe the last step is electronic? I forget if I had to drop off a paper check at my current employer when I rolled over my old account). I generally do this, though I suppose I should look at fees and stuff in the future before just doing it blindly for convenience's sake of having everything in one place.
You do indeed have the option to merge multiple 401k accounts together after you leave your job.
And on the larger view, pensions represent a liability (I promise to pay Joe Sixpack 40% of his salary after ten years of service, some of which he will contribute to), while 401(k)s represent no liability at all. Work for the company 40 years and your 401(k) won't cover your retirement? Too bad. Should have contributed more or invested better; the company doesn't owe you anything. Or, for another example, if Joe lives to be 100 and he only planned for 76, that's a major problem with a 401(k), but a pension would still have to pay out, and it would be on the company's dime.
In addition, at least in my experience, company contributions to 401(k)s tend to be small and decreasing (for example, my company contributes a maximum of 3%, paid once a year) over time, and you have the additional complexity that vesting introduces, where (at least as I understand it), they can take it back if you quit roll your 401(k) over somewhere else.
So I'm not sure under what circumstances a 401(k) could ever not be cheaper. Are there some?
Random change of subject, but did you ever wonder why some companies match 401(k) contributions? Or automatically give you a small contribution regardless if you decided to contribute yourself?
It's because 401(k) contributions for highly compensated employees (HCEs) are at risk of not getting the tax deferral unless the 401(k) plan meets a bunch of metrics including participation, etc.[1]
And you thought they were doing it out of the goodness of their hearts! ;)
[1] https://blog.personalcapital.com/retirement-planning/seeking...
That's actually not really true. The 401(k) was an obscure provision in the Revenue Act of 1978 and it wasn't until two years later that Ted Benna realized it could be used as a loophole to set up an employer-matched retirement plan: http://www.learnvest.com/knowledge-center/your-401k-when-it-... It wasn't designed to be used this way, and that's not what the IRS had in mind when they originally drafted the rules.
Companies love them because they're cheaper than a pension plan, and crucially, they transfer all the risk and responsibility onto individual employees and away from the company.
"Only about half of American workers have access to a 401k, which is a workplace savings plan that lets employees invest a portion of their paycheck before taxes are taken out. The savings can grow tax free until retirement, at which point withdrawals will be taxed as ordinary income. A large majority of employers will match an employee’s contribution – up to a point – thereby boosting the employee’s savings rate."
Solo 401k? 401k? Roth 401k? IRA? Roth IRA? SEP IRA? SIMPLE IRA?
FFS, just create legislation for two types of retirement accounts, pre-tax and post tax. Restrict by total yearly contribution between all accounts, with another limit for employer contribution. Setup contributions from both employee and employer with ACH routing and account numbers. Problem solved.
Do all employees have to use the automatic advising, or can they invest independently if they want?
That said, we've found that most 401k users don't want to bother with analyzing and choosing between dozens of confusingly-named funds. They're much happier (and better off financially) with a solution that automatically gives them a globally diversified, low-cost, regularly-rebalanced portfolio without doing any of the work.
That said, employees using our investment advice get additional diversification (6-7 asset classes), as well as a more personalized recommendation that takes into account not just your age, but also your risk tolerance, financial situation, other investments, etc. We think that's better than a one-size-fits-all fund.
I work for a company whose major goal is to make that job disappear, and do most employee onboarding and other annoying HR documents tasks online, mostly automatically.
We do payroll, and integrate with various healthcare and retirement providers as our customers need.
So far it's worked out really, really well.
I had been telling my soon-to-be-former firm create something like this forever!
Are you 100% managed investments? Or can an employee opt to pick their own investments? Do you have access to the admiral funds and are you allowing the company to chose which funds are available?
Yes, we have access to Vanguard's lower-fee admiral funds. Companies can pick which funds they want in their 401k plan, although most choose a standard lineup of Vanguard index funds that spans across all the major asset classes and risk categories.
Do you use the recordkeeper's websites or have you built your own?
Are there any other costs that get passed on to the participants?
EDIT: don't listen to people talking about compound interest. If you have a 401(k) you will be paying this interest to the government bonds your 401(k) holds when we are finally in NIRP. Look at Greece today, they are going to have to pay $71M on July 17 which is just the interest on their 2014 3-year bonds.
If you are young, learn from the bad advice coming from the old folks.
EDIT 2: owning US stock, no matter when purchased, is a bad idea now in these times of share buyback, yes. So yes, it cannot be a good idea to hold stock now since we're due a crash (which got caught yesterday by a "system update glitch" at NYSE which curiously affected United Airlines and Wall Street Journal as well). Holding some gold and cash, as Bank of America advises NOW, is a very good idea: http://www.bloomberg.com/news/articles/2015-05-18/bank-of-am...