Last week the Society for Human Resource Management published a very informative article authored by Joanne Sammer. The title of the article is, “Do 401(k) Managed Accounts Live Up to All the Hype?”
Most individual company 401(k) retirement plan participants that I meet with don’t completely understand their target date mutual fund options. Even fewer individual investors understand how target date mutual funds differ from managed accounts.
Target date mutual funds and managed accounts add more annual costs to individual company 401(k) retirement plan accounts. Several studies have concluded that the additional costs don’t translate into improved investment performance.
Even with the recent U.S. stock market record highs, the investment returns that I have seen from target date mutual funds and managed 401(k) account options are not worth the additional annual costs.
When you add in the stock and bond market risk involved with these accounts, the risk has not been worth the investment performance reward.
The investment management decision involving any third-party company 401(k) retirement plan account investment option is very simple. Ask yourself the following question.
Are the additional annual costs involved worth the annual investment returns provided?
Now is the time to completely understand what you own in your company 401(k) retirement plan account. Don’t continue to believe that any third-party company 401(k) retirement plan account option is worth the costs.
Lager & Company, Inc.