401(k) Fee Disclosures May Fall Short

Even if plan participants read the vast amount of details plan providers have published on fees they will continue to be underserved. Most plans provide a high number of fund choices with little direction and guidance. 401(k) plans need to be designed to look more like a pension plan to be effective in reaching their goal fo a successful retirement.

English: Graph showing amounts of pension capi...
English: Graph showing amounts of pension capital (investments of pension funds + investment by insurance companies on behalf of pension schemes) in a number of European countries. Graph shows amount of money a a percentage of GDP. Source: De Nederlandsche Bank NV, Kwartaalbericht juni 2008 p. 34/Dutch Central bank, Quarterly Bulletin June 2008, page 34. If you would like to have this graph with a caption in another language, please let me know. Used on Pensioenfonds. (Photo credit: Wikipedia)

Arranging the right mix of investments in the right amount and adjusting for your personal risk tolerance requires basic knowledge of modern portfolio theory — a set of market maxims and principles that must be carefully applied. And to get the best results, the investments that you buy as a result must be carefully monitored and tweaked, or fundamentally shifted, as you go along.Ask the advisor about the calculation for your retirement resources. Basically, here’s how that works: If you invest x amount a year for x number of years and receive an average return of x and inflation is x, then as of x date you’ll likely have about x dollars a year that you can take out of your investment accounts.

How much money you’ll have and need henceforth depends on a number of market and personal factors, including how long you’ll live. Look at your current plan contributions to see whether you’re on track. Chances are, you’re not. This calculation is no easy business, but with the right advice, you can make a stab at it.

Plan sponsors need to require their plan adviser to educate their employees individually or in groups. The 401(k) plan must become more of a pension fund like plan in order for employees to succeed in reaching their retirement goals.

Please comment or call to discuss how this affects you and your 401(k) plan.

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