The 401(k) plan your company sponsors is the sole source of retirement for all your employees. Please do not rely on your broker to provide a prudent plan.

• Cut the number of investment options in your plan by half. If you operate a typical plan, you’re dumping more than a dozen different choices on your employees all at once. Give them a break. They work for a living (or so you hope). Don’t make investing in their retirement more work for them. Countless studies have proven folks just plain clam up when confronted with too many options to choose from. Make life easy for them. Give them less to choose from.
• When presenting investment performance for long-term options (which should be most of the ones offered in your plan), emphasis rolling 5-year performance. Why 5 years? Because that’s the minimum amount of time most professionals consider “long term” and because it allows those one-in-a-million performance years that tend to skew 10-year or since inception returns to roll out quicker. But the most important reason is to avoid unduly emphasizing short-term volatility that longer holding periods tend to dampen down. Research shows, when presented with the ragged chart of volatile one-year returns, 401k investors tend to investment more conservatively than they should. They have a lifetime to grow their retirement nest egg. Encourage them to do so by framing investment performance in a more useful – and less misleading – manner.
• Nuts! We just wasted two of our three wished on investment related items. They’re not even the most important factors that lead towards a great retirement. That brings us to our final tip: stop advertising investments. Retirement plans aren’t about investing (although investing is a byproduct), they’re about saving. When you offer those general education sessions, make sure at least three-quarters of the time is spent on showing those wide eyes in attendance why saving is the most influential component that determines whether or not they will retire in the lifestyle they desire. Tell participants that using their 401k plan is not rocket science, it’s simple math: the more you save today, the better off you’ll be tomorrow.

Your company sponsored retirement plan is the sole source of retirement for your employees and yourself. We must improve the quality to improve participation as well as the results.

Please comment or call to discuss how this can improve your ability to attract and retain top employees.