Salient to Investors:
Key things to consider about 401(k)s:
- Keep total investment fees under 1%; including fund expenses, administration, asset management, and any other silent fees.
- Over the long-term, few professionally managed funds outperform their peer market index. The hot fund of one year will often be below average in the years ahead. So use index funds.
- Choose a provider that takes on a fiduciary responsibility with your 401(k) – in writing. Fund and insurance providers as well as the sales agents, too often referred to as an “adviser”, are often biased by their own offerings and/or earnings – why many 401(k) plans offer very few if any index funds.
Watch PBS Frontline’s The Retirement Gamble.
Read the full article at http://www.forbes.com/sites/stuartrobertson/2013/05/13/pbs-frontlines-the-retirement-gamble-got-401ks-right/
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If you care about your retirement savings and you haven’t had a chance to view PBS Frontline’s The Retirement Gamble, pull up a seat and take a view. It could be worth a whole lot in terms of understanding what’s needed to build the nest egg you need and take out all the financial mumbo jumbo that makes 401(k)s confusing.
If you don’t have an opportunity to watch the full show, the following are key things to consider whether you are an employer offering a 401(k) or an employee investing in one:
- Costs Matter: Keep investment fees low as it can help keep more money invested in the markets versus in the hands of financial providers. These fees include things you may not be aware of including fund expenses, administration, asset management, and any other fees that silently but surely are taken from your 401(k) account. Total fees of less than 1% is the goal. The difference of paying even 1% more in fees can cost you hundreds of thousands of dollars over the course of a career.
- Use Index Funds: Over the long-term, few professionally managed funds (known as actively-managed funds) outperform its peer market index. An index fund tracks a particular benchmark such as the S&P 500 or the Dow Jones Industrial Average. The hot fund of one year will often be below average in the years ahead. The steady but true indexes are the efficient way to earn market returns, eliminating the stock picking risk of fund managers.
- Choose a provider that takes on a fiduciary responsibility with your 401(k): This simply means use a provider that agrees in writing to act in your company’s 401(k) plan’s best interest. Fund and insurance providers as well as the sales agents (too often referred to as an adviser) are often biased by their own offerings and/or earnings which could mean your plan doesn’t have the best fund options to position employees for a bigger retirement. It’s also probably why many 401(k) plans offer very few if any index funds.
It’s pretty straightforward and common sense. Now it’s just getting more employees and employers to take the plunge and make the changes necessary — including changes to their plan, or their 401(k) providers – to help ensure a much more secure financial future for everyone.