Bundled V.S. Unbundled 401(k) for Pizza Lovers
If you are someone who is fairly new to the Retirement plan industry (like me) then you probably don’t really know the difference between bundled and unbundled 401(k) plans. Shopping for a retirement plan is a lot like shopping for pizza, it just doesn’t taste quite as good.
When I was grocery shopping last week, I found myself debating on whether to purchase a frozen pizza or to make my own. Each option had its advantages and disadvantages so I made a pros and cons list in my head:
The only pre-made frozen pizza available at this grocery store was vegetarian therefore my options were limited. If I chose a vegetarian pizza I would go home and add chicken or pepperoni’s because I am carnivorous in every sense of the word. The convenience of a pre-made pizza was enticing, the cook time would be somewhat shorter and it would take less work on my part.
On the other hand, if I were to assemble my own pizza I would spend some extra time creating it and I would pay a few dollars more. The pizza I make on my own would be customized to fit what I like, with the appropriate amount of cheese (extra cheese please!) along with the quality toppings that I really desired. I might even end up with an extra pizza because of all the leftover ingredients.
What pizza would you choose? A bundled provider might fit your needs better if you are looking for an all in one, i.e. “bundled” service. A bundled provider is a one-stop-shop that will manage your investments, record keeping, and administration. You won’t be able to customize your plan to accommodate any specific needs or requirements, but most bundled providers are budget-friendly and this might be your best option for a small plan that’s just starting out.
With an unbundled service provider, you have the flexibility to customize your retirement plan just the way you like it- allowing for maximum tax deductions and compliance. You’ll hand pick your ingredients i.e. financial advisor, Third Party Administrator, and plan custodian; like you would pick mushrooms, onions, or olives for your pizza. Unbundled providers typically focus only on administering a plan, ensuring it fits all appropriate guidelines provided by the Internal Revenue Service and the Department of Labor. The unbundled service compares to the custom pizza in that you might spend more money, but ultimately you receive more in value and service.
In the end, I decided to create my own pizza. Initially, I invested a little bit more time and money in the ingredients, but I was able to get something that I really liked (I even had leftovers). Tell us about your favorite pizza recipes in the comments below or if you have any questions about bundled v.s. unbundled 401(k) plans, you can ask those here too.
P.S. Barbecue Chicken Pizza is my favorite.