Reduce and group
Chris Carosa, the chief contributing editor of Fiduciary News, typically recommends that plan sponsors reduce the total number of investment options available to 401k plan participants and group those investment options into four categories, or tiers, each with one to five mutual fund options.
The specific categories Carosa recommends are:
- A default option, including one traditional profit-sharing option, for those who don't want to think about investments but know they need to save.
- Lifestyle-allocation options, including three or four balanced options -- such as conservative, moderate and aggressive -- for those who don’t want to classify their needs too specifically.
- A traditional long-term portfolio, including three multicap options, for those who are willing to do the work of identifying their specific long-term needs.
- And, do-it-yourself options, including four or five index-fund options, for those who think they can handle their own asset allocation.
Plan sponsors should read Carosa's article at Fiduciary News.
With that sort of 401k investment menu, Carosa would advise plan participants first to choose the appropriate category of investments, then, if necessary, to pick an appropriate fund or mix of funds if the participant chooses the do-it-yourself option.
Worst case? Work 4 more months and save more early
Of course, even your plan administrator doesn't pick the right funds for your 401k, and even if you chase hot funds in your 401k just right, consider this: According to Carosa, a recent study suggested that 401k plan participants need only work four more months to make up the difference in investment returns between the optimal asset allocation and the typical asset allocation.
"It further concluded that, rather than investment specifics, participants focus on saving more and saving earlier -- things more easily in their control," Carosa said.
And one last thing: Carosa cautioned that a different time period or different types of 401k plans might yield entirely different conclusions than those of the CRR research report.
More from MarketWatch:
MORE ON MSN MONEY
VIDEO ON MSN MONEY
Do yourselves a favor: Go read the principles of John Bogle, the fouder of Vanguard, who initiated index funds and low fees.
You can find a wealth of information at Vanguard, or at the bogleheads blog-site.
I have been saving for retirement at Vanguard for well over a decade, and I'm extremely satisfied. You are an owner, by being an investor; no profits for fat-heads upstairs. Vanguard is now number 1, and everyone else is chasing the 'low-fee' approach.
Best of luck to you all, I know it can be tough.
I simply feel this is a great firm to have on my team...
Biggest mistake is giving Wall Street manipulators your 401k savings to (Gamble) play with..
Then there are the Account Administrators who skim your money off the top...
The first mistake is NOT saving for retirement. I smile every month I send my check to the mutual fund company. I know someday I will be done working. The second mistake is not starting early enough. I started when I was 21 in an IRA account. $2000 Dollars a year. I used my tax returns, plus a little extra to get that each year. Yes, I sacrificed each year to do this, especially when the kids were little. But you must pay yourself first, if you want to WIN.
Contact a mutual fund company that sells NO Load funds. Vanguard, American Century Investors, etc. The earlier you start, the quicker you get the magic word working for you. That word is COMPOUNDING. Interest added to your principal investment each month grows to a larger number each month. Over time you aim for 8 to 10 % annual growth. I control my investment choices. Then diversify between growth stock funds, international funds, and small cap funds. Read a good book on mutual funds, and how they work. Read Money, Kiplingers magazines. Over time you will get excited as to how much it grows. In five years that initial 10,000 will grow to about 15,000. The key is to educate yourself on this, and STICK with it. Invest the same amount each month. Don't depend on other people to do it for you, you must educate yourself to win.
If you leave your company, roll your 401K into an IRA account. Do not touch the money. The penalties and taxes will only make the government rich. Invest in the IRA in good growth mutual funds. I have done this for over 25 years, and I'm well towards my goal. Good Luck.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
- July crude oil retreated into negative territory following inventory data that showed a build of 0.313 mln barrels when a draw of 0.5 mln was anticipated. The energy component dipped to a floor session low of $98.03 per barrel and chopped around below the unchanged line until the release of the FOMC policy directive at 14:00 ET. It then popped to a session high of $98.74 per barrel but ultimately settled 0.2% lower at $98.25 per barrel. Prices fell to a new LoD of $97.57 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|