401K Participants Are Short on Investment Smarts


A recent study by Wyatt found that self directed 401K plans had a median difference in rate of return of 2.5 percent when compared with professionally managed plans.

The significance of a 2.5 percent reduction in rate of return over your career is a 50 percent reduction in retirement income!

What steps can be taken to improve this outcome? Make investment education an ongoing program — not once a year but once a month via a newsletter. In addition, have a registered investment advisor involved on a fee basis to educate and communicate the ABC’s of responsible investing. These two steps can improve the investment performance dramatically.

By the way, when was the last time you received investment advice from the bank or mutual fund provider? The answer is never since they are prohibited by law from giving advice. They will send you 30 pounds of paper to read which the average participant finds bewildering as well as frustrating. In the monthly education process the participants are educated on their responsibility and ‘how’ their current investment decisions will impact their retirement income (see Retirement Paradigm article in this newsletter). This process is not a once a year, but an ongoing process each and every month. Want better results? Call us for a consultation.