Have you ever taken the time to understand who constructed your company 401(k) retirement plan mutual fund menu?
If you work at a large Fortune 500 company, a high-priced retirement plan consulting firm picked your company 401(k) retirement plan mutual fund options. Lately, those professionals have loaded company retirement plan menus with index mutual funds and target term mutual funds.
Why? The answer is in the headlines over the last few years. Company 401(k) retirement plan sponsors are scared to death of lawsuits. Index mutual funds have some of the lowest annual fees available. Target date mutual funds are set up as auto-enrollment options in order to pre-determine safe asset allocations.
The problem for individual company 401(k) retirement plan participants is that no one in their company 401(k) retirement plan equation is looking out for their best interests.
Company 401(k) retirement plan providers and sponsors are legally required to be fiduciaries. Then why all the lawsuits?
Who are the unbiased third-parties who are required to act on the behalf of the individual company 401(k) retirement plan participants?
The company 401(k) retirement plan sponsor most likely choose the lowest annual cost retirement provider they find. The company 401(k) retirement plan provider receives a large portion of the annual compensation from the mutual fund companies that make up a company 401(k) retirement plan mutual fund menu.
The sponsor is looking for the cheapest way out and the provider is compensated by the mutual fund companies they select. How are each of those decisions in the best interest of individual company 401(k) retirement plan participants?
The only logical investment management decision for individual company 401(k) retirement plan participants to make is to find a fiduciary level, third-party, investment advisor to completely analyze their default company 401(k) retirement plan menu.
This investment advisor would provide transparent information on the historic strengths and weaknesses of each company 401(k) mutual fund option. This analysis would include annual cost comparisons and investment performance rankings.
In everyday life, individuals search for the best price for the best value. Why is the same level of information not easily made available for every individual company 401(k) retirement plan participant?
Current major tax legislation changes threaten to take away many of the tax deduction benefits of annual company 401(k) retirement plan contributions. Individual company 401(k) retirement plan participants deserve more information on annual mutual fund fees and investment performance.
Ric Lager
Lager & Company, Inc.
