Starbucks Should Expand Its 401K Retirement Plan, Just As What It Did in Their Business
03/11/2011 0 comments
Starbucks (NASDAQ:SBUX) recently celebrated its 40th year anniversary by giving out free petites. The company, established 40 years ago in Seattle, has expanded dramatically nation wide and the world wide. It has more than 15,000 stores in 50 countries, making it one of the premier roaster and retailer of specialty coffee in the world.
For its employees, Starbucks served Starbucks 401K Plan that consists of 9 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income. The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
As of Mar 9, 2011, this plan investment choice is rated as below average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as below average (14%)
Fund Quality -- Rated as above average (75%)
Portfolio Building -- Rated as poor (5%)
Overall Rating: below average (29%)
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA , both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 3 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:
US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Fixed Income: AGG or BND
Performance chart (as of Mar 9, 2011)
Performance table (as of Mar 9, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Starbucks 401K Plan Tactical Asset Allocation Moderate | 5% | 69% | 5% | 57% | 7% | 62% |
| Starbucks 401K Plan Strategic Asset Allocation Moderate | 12% | 117% | 1% | 4% | 3% | 10% |
| Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate | 0% | 17% | 3% | 29% | 4% | 37% |
| Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate | 13% | 115% | 4% | 18% | 4% | 19% |
The plan does consist of some good funds such as tAmerican Funds Fundamental Investor R4 (RFNEX). Its fund quality is actually ranked above average. In terms of its fund varieties, however, we would say Starbucks' 401K plan is lean and simple, maybe too simple even compared with its decaf coffee! There are only 9 funds in the plan, missing other major assets including emerging market stocks and real estate (REITs). In the fixed income side, a Dodge & Cox Income fund (DODIX) is the only choice, giving employees not much room to take advantage of various economic cycles.
For example, currently Commodities, US Equity and Real Estate are doing well. Only US Equity is available to Starbucks 401K Plan participants.
To summarize, Starbucks should expand its 401K plan to broaden its offerings, just like in its business expansion. Keeping its high quality funds and adding a few more covering some missing assets, as well as giving more choices in fixed income funds would certainly help to improve its participants' retirement accounts.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:SBUX,SPY,VTI,EFA,VEU,AGG,BND,CIU,BIV,GWL,PFA,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,ELG,QQQQ,RPG,SCHG,IJR,IWM,JKJ,VB,DSC,PJM,DES,SAA,UWM,SCHA,IJT,IWO,JKK,VBK,DSG,PWT,RZG,UKK,
comments
0
Or Start FREE 30-day trial now >>
