Is the John Hancock 401(k) a good deal?

As more Americans believe that they won’t have enough money for their retirement, saving for those golden years are more important than ever. Many Americans who were apprehensive about their retirement income have turned to the popular 401(k) plan.

Some retirees and would-be retirees have turned to John Hancock, a subsidiary of Manulife Financial, to handle their 401(k). The 401(k) plan is perhaps the most common and most trusted employer-sponsored retirement plan available. But is the 401(k) plan from John Hancock any different from other 401(k)s?

InvestmentNews seeks to provide answers to questions about this particular 401(k). We’ll discuss important topics like:

• what is the John Hancock 401(k) plan?
• how do you do a John Hancock 401(k) withdrawal?
• are there John Hancock 401(k) investments?

Let’s delve into the John Hancock 401(k) retirement plan.

401(k) plans: a refresher

The 401(k) is probably one of the best retirement savings plans anyone can have. That’s because the 401(k) is a retirement plan offered by employers with the option of contributing a percentage of employees’ salaries.

Salary contributions are on a tax-deferred basis. And depending on an employee’s target retirement date and financial needs, they can choose the type of investment funds within the plan that makes the most sense.

One of the best features of the 401(k) plan is the 401(k) match. This is a feature that allows employers to contribute a portion of their employees’ salary contributions to the plan. By doing this, the employer effectively “matches” their employees’ 401(k) contributions. The 401(k) match is a common practice, and employees are encouraged to take advantage of this to maximize their retirement savings.  

Just as 401(k) plans differ from provider to provider, they can also vary from employer to employer. Some companies may offer a generous 401(k) match, while others offer none. Employees might want to keep this in mind and check an employer’s 401(k) before accepting a job offer.

With a 401(k), employees also have the option of investing in conservative or aggressive investments.

They can even choose how much of their paycheck to invest and how frequently they wish to contribute throughout the fiscal year. In this manner, investments can grow over time. When employees reach age 59½, they can withdraw funds without incurring the early withdrawal penalty.

The pros and cons of the John Hancock 401(k)

As with any investment or retirement tool, the John Hancock 401(k) comes with its share of benefits and drawbacks. Here's what employees, employers, and plan administrators should know.

The pros of John Hancock 401(k)

It offers educational resources

New clients of John Hancock get access to a range of educational tools and resources. These tools can be helpful in educating plan participants about saving for retirement. John Hancock also supports financial professionals through a dedicated page on their website:

The plan comes with good administrative services

John Hancock offers a suite of administrative services called JH StartSmart. This platform is their set-up and conversion plan to help with new client onboarding.

With these services, new plan participants can easily transition from their existing retirement accounts into the John Hancock 401(k) with their current employer. John Hancock also provides EZAdmin, an automated recordkeeping service. There are additional fees for these administrative and recordkeeping services.

John Hancock offers a lot of investment options

As a large asset manager and 401(k) provider, John Hancock can give plan participants the privilege of choosing from funds with a lot of exposure to different asset classes. Here are some of the funds that JH 401(k) plan holders can choose from:

US stocks

• Fundamental Large Cap Core Fund (TAGRX)
• Disciplined Value Mid-Cap (JVMAX)
• Small Cap Value Fund (JSCAX)

International stocks

• Disciplined Value International Fund (JDIBX)
• Emerging Markets Equity Fund (JEMQX)

Bonds

• John Hancock Income Fund (JHFIX)

Among the best for small businesses

Smaller companies with smaller 401(k) plans often find it difficult to find a good plan provider at administration rates they can afford. Thanks to John Hancock, their 401(k) plans were less burdensome for small businesses.

Their way of doing business is to provide 401(k) plans that don’t put all the administrative costs on the employers’ shoulders – but there is a caveat to this.

John Hancock may excel when it comes to providing 401(k) plans to small businesses, but this success doesn’t translate into mid-sized businesses. In a May 2024 report on the top 401(k) providers, John Hancock is no longer on the list.

The cons of John Hancock 401(k)

It has high fees

The best feature of the John Hancock 401(k) is also its biggest drawback. John Hancock 401(k) places the burden of paying its administrative fees on employees instead of employers. This is why it appeals to small businesses – it's structured to favor employers over employees.  

At first glance, the fees that come with a John Hancock 401(k) may seem small, but these add up in the long term through compound interest.

Small businesses (or their employees) using John Hancock will have to pay administrative or record-keeping fees ranging from 0.97% to 2.5%. John Hancock claims, however, that it’s possible to pay less than 1.25% and still make use of their platform.

In addition to the fund fees, plan participants would have to pay an additional 1.69% for administrative fees. Larger plan sponsors can easily take on these administrative fees. But for small businesses, this is typically not feasible. That's why the John Hancock 401(k) provides small business owners the option of passing on that financial burden to their employees.

The funds for the John Hancock 401(k) are actively managed

Another caveat and possibly serious drawback to the John Hancock 401(k) is that the funds are all actively managed. Unfortunately, the goal of actively managed funds, which is to beat or outperform the market, is a lofty one. Actively managed funds typically cannot and do not beat the market. As Warren Buffett once said, “The record shows that the unmanaged index fund is going to do quite well over time and active investment as a group can't beat it."

What is the John Hancock company?

Originally founded in 1862, John Hancock started as a life insurance company. Since then, John Hancock has grown and transformed itself into a huge financial services firm with a wide array of financial services. They now offer life insurance, long-term care insurance, college savings plans, groups annuities, investments, and retirement savings.

It has many different subsidiaries that offer these different products and services. For example: 

• John Hancock Retirement Plan Services, LLC offers administrative or recordkeeping services to sponsors and administrators of retirement plans
• John Hancock Trust Company LLC provides trust and custodial services for these plans
• John Hancock Life Insurance Company handles group annuity contracts and recordkeeping agreements (these are issued by John Hancock life insurance company USA, Boston MA, but not licensed in New York and John Hancock life insurance)

Different branches of John Hancock are collectively referred to as “John Hancock”, which includes:

• John Hancock Life Insurance Company (U.S.A.) (John Hancock USA), Boston, MA
• John Hancock Life Insurance Company of New York (John Hancock New York),
• John Hancock Retirement Plan Services, LLC
• John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York)
• John Hancock Life Insurance Company of New York, Valhalla, New York 

John Hancock Retirement Plan Services currently services more than 58,000 plans and over 2.8 million plan participants. At present, the company does much of its business by partnering with employers to offer retirement plans like the 401(k) to their employees.

Is the John Hancock 401(k) worth it?

The John Hancock 401(k) is not much different from other 401(k) plans, except for the special John Hancock funds you can place in them, and the high fees. And to answer the question, there is no hard yes or no answer because it depends on who’s asking.

For employers, the John Hancock 401(k) may be a good option as part of the benefits package, especially if their business cannot afford most other 401(k) plans. Sometimes, the alternative to a 401(k) may also be more costly, making the John Hancock 401(k) much more appealing to small businesses.

At first glance, the John Hancock 401(k) may appear to be a good option for employers to make part of their company’s benefits package. However, upon closer inspection, this may not be the case for every employer. The main issues are:

• John Hancock 401(k) fees are too high
• the bulk of its investments consist of actively managed funds that could result in lower returns
• employers have the option to pass fees onto their employees

Employers should think well before choosing this 401(k), because doing so may prompt employees to hold them liable for breach of fiduciary duty, especially if there are better plan options available.

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