Seven 401(k) Strategies for 2012

There are seven strategies listed in this article. In my opinion, the most influential is managed portfolios. By offering a more pension fund like plan your company will improve the quality of your plan to the point of becoming a true employee benefit. The most effective plans will automatically put an employee, based on age, into a risk adjusted globally diversifed portfolio. As the employee ages the portfolio will be adjusted to a more conservative risk level. The employee have the option of choosing a more conservative or aggressice portolfio or opting out of the models all together a choosing their own mix. The majority will do nothing and stay in the age appropriate portfolio. This one action will improve results.

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Reconsider custom target-date funds. Custom target-date funds are tailored to a plan’s specific participant demographics rather than a standard target retirement date that a plan provider applies to all of its clients. These funds and other “default investments” are now cost-effectiveat much lower asset levels, owing largely to efficiencies gained from the growing number of plans employing automatic enrollment and automatic escalation of participant contribution levels, says Toni Brown, director of U.S. client consulting for Mercer’s investments business. 

This one strategy will do more to improve the results of your plan than any other. By automatically putting plan participants in an age based professionally managed globally diversified portfolio results will dramatically improve over the long term.

Please comment or call to discuss how to make you compnay 401(k) plan a pension fund like plan.

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