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Friday, August 30, 2013

5 Reasons to Overthrow Your 401k TODAY

1. It's too expensive. Hear this—your plan costs you and your participants way too much. Your advisor might tell you that he has reviewed it and it's "in line" with the industry. He might quote the Department of Labor's contention that "401K costs are trending down." But even if that’s accurate, they have A LOT farther to fall; "reasonableness" shouldn’t be based on the collective failure of the industry. A typical 401K plan, comprised of actively managed funds costs about 150 basis points on average. It can and should cost closer to 40. Is your cost really “reasonable” at 145?!

2. Index funds outperform actively managed funds 80% of the time. Don't believe it? There are endless studies that prove it. Check out the latest Dalbar Study for great set of numbers and charts. Why on earth would you subject your employees’ money to higher, non-productive cost? Actively managed funds outperform the index so infrequently (and the rare winners never repeat), the event can only be characterized as a lucky guess. Wouldn’t you rather tell employees that your plan helps them succeed by not subjecting them to guesswork and excessive cost?

3. Employees aren't participating. Depending on the industry, 40-60% participation is the norm. Put another way, that’s 40-60% of employees that don’t have a retirement plan. Does that meet your definition of success?

4. Participants are lost and have no hope.  

Lost: According to a recent Charles Schwab survey, “But more than half of the 401(k) savers said their plan’s investment options are more confusing than their health-care benefits, and 57% said they wish it were easier to choose among their plan’s investing choices.

Forty-six percent of savers said they don’t know what their best investment options are, and 34% said deciding how to invest in their 401(k) is causing them a lot of stress. (The survey respondents ranged in age from 25 to 75, and worked at companies with 25 or more employees.)

No Hope: According to a recent article on Yahoo Finance, only 13% of people with 401K accounts think they will have enough to retire with. 

5. Its highly likely that you can lower the cost of your plan by 50% or more and make it more successful for both your company and your employees. Do you still have actively-managed funds in your plan? Are you still hoping to turn employees/participants into investment pros? Are nearly all your people in your plan? Are your participants saving enough? Are participants exhibiting good investment behavior with their accumulated savings? Only you know the answers to these questions and only you know whether your plan is successful. If it’s not, it’s time to overthrow your plan and the advisor(s) that got you to where you are today.

Rest assured—there is a better way! Visit us at to learn more!

Posted by 401K Revolt at 4:05 AM