Prudential 401(K) Plan Review 2021

Prudential 401(K) retirement review: IRA fees, plan rates, retirement investment options, mutual funds selection, pros, and cons.

Prudential: The Company

Prudential is one of the largest financial services companies in the market; providing mortgages, loans, insurance, retirement accounts, and many other products. This review will be focusing on Prudential’s 401(k) account offering. Before diving in to the review, there will be a quick overview of the 401(k) retirement vehicle. After the short explanation there will be a review of Prudential’s website, goal setting tool, fund selections, management tools, and then a summary to tie everything together. Read on to see if Prudential’s 401(k) offering is a solid option.

401(k) Overview

The 401(k) is a tax advantaged employer sponsored retirement plan. By being tax advantaged, 401(k) account owners can avoid paying taxes either when they make contributions [Traditional 401(k)] or when they make withdrawals in retirement [Roth 401(k)]. In addition to those advantages all investment growth is tax-free. This can save retirees thousands and thousands of dollars in the future. Because 401(k)s are such a good way to get out of taxes and save, Uncle Sam caps 401(k) contributions at $18,000, or 80% of total income, for the 2021 tax year.

Now for the employer sponsored part: to contribute to a 401(k) an individual needs to work for an employer who provides one. The employer then partners with a 401(k) provider. 401(k)s can be provided by a number of companies, although this review will focus on Prudential’s.

Website Usability

Prudential 401K

Prudential’s landing page is modern and easy on the eye. The main page has a snapshot of the account’s value, year-to-date performance, and an estimated retirement income chart. This view is very simple, but it contains almost everything a customer needs to quickly check on their account.

Drilling a little deeper reveals a wealth of options and information that a customer can use to control their account. One very useful section allows users to see current and past performance of the available funds. This lets users get a quick feel for which funds best suit their investment style.

The individual performance pages also hold the fund prospectuses, manager information, and fund objectives. All of this information can certainly help users make the best investment decisions for their situation.

The only negative about the Prudential 401(k) website is that, aside from a few pages, most of it is somewhat outdated. The performance page, for example, looks like it was last updated in the early 2000s. That being said, the outdated interface is a small price to pay for the amount of freedom given by the website.

Prudential 401K Account

Goal Setting Tool

Prudential 401k retirement plan

Speaking of freedom, Prudential’s goal setting tool is a great way to determine when retirement is an option. They also offer the freedom to change almost any retirement related variable imaginable. This includes retirement age, years in retirement, the amount of money spent in retirement, the expected rate of return on investments, and so on.

Needless to say, this tool helps give a lot of clarity for people planning to retire. Retirement can be a very tricky and vague thing to plan for; Prudential’s goal setting tool helps make retirement planning easier.

Prudential 401K Fund Selections

One thing to note about 401(k)s is that the employer sponsoring the plan selects the available funds. In general, plan participants will be offered:

  • Large cap growth and value funds
  • Mid cap growth and value funds
  • Small cap growth and value funds
  • Fixed-value/Bond funds
  • An S&P 500 index fund
  • A “market completion” index fund
  • International index funds
  • Company stock

After looking at these funds, it is clear that Prudential takes investing for retirement seriously. Plan participants will typically have a wide range of investment options with very low expense ratios (all under 1%). These fund choices are very competitive and help give plan participants a solid start on saving for retirement.

Prudential 401K Management

Prudential offers great tools to help investors “set it and forget it”. The two major tools are the “Contribution Accelerator” and automatic portfolio rebalancing.

Prudential’s Contribution Accelerator does what the name implies: automatically increases the participant’s contribution rate. With this feature turned on, Prudential will increase the contribution rate by 1% every year, until it hits 8%. This is a fantastic way to increase retirement savings without noticing.

Yearly rebalancing is an important step for all portfolios, and Prudential’s automatic rebalancing helps account holders do this easily. Over the course of a year, some investments will increase in value faster than others; some may even decrease in value. This often leads to the carefully selected asset allocation ratios being thrown off. What started as a 20% allocation in the S&P 500 could jump to 30% or more of the portfolio’s total value.

Needless to say, this exposes the account to more risk than planned. In this example, automatic rebalancing will move the additional 10% in the S&P 500 over to underperforming funds. Essentially, rebalancing a portfolio means buying low and selling high. Thankfully, Prudential will take care of this confusing task automatically every year.

These management tools are offered free of charge to Prudential account holders.

Prudential 401(K) Review Conclusion

In summary, Prudential offers one great 401(k) plan. Their website is about average but contains a wealth of information. It also has many useful tools, like the goal-setting tool, that help take the pain out of retirement planning. Other tools like automatic rebalancing and their contribution accelerator help keep the account in great financial shape. All in all, Prudential offers a solid competitor in the 401(k) market.

Other articles of interest are M1 Finance Review and TD Ameritrade Review.

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