Here is another reminder about how much more individual investors don’t know about the biggest piece of their retirement savings; their company 401(k) retirement plan accounts.
The 2018 TIAA Institute-GFLEC Personal Finance Index was recently released. This report is an annual measurement of the financial knowledge of individual investors.
“Most Americans lack personal finance knowledge necessary to make appropriate financial decisions in the normal course of life.”
Ouch.
This is not good news. The readiness of individual investors to make sound company 401(k) retirement plan investment management decisions is lacking. Most individual investors don’t have the required knowledge to make even the most routine financial decisions.
The lowest reported level of financial literacy was reported in the comprehension of investment risk category. That is especially scary now based on the last few weeks of U.S. stock market volatility.
The results of this report do make sense if you think about it. Where do most individual investors learn how to make investment management decisions?
There are only a small handful of life experiences that would qualify. You can learn from your parents, learn in school, or build a relationship with a trusted independent investment advisor.
You can’t learn from your company 401(k) retirement plan sponsor or provider. Each care more about their liability and exposure than they do about the successful investment outcomes of their individual company 401(k) retirement plan participants.
To uncover and own the lowest-cost and best-performing mutual funds on a default company 401(k) retirement plan menu is not difficult for a trained investment professional with no conflict of interest.
I can speak from personal experience. You just have to take the time to find one. They are out there. Regardless of your financial literacy.
Ric Lager
Lager & Company, Inc.
