Have A 401k? Better Read This
I came across the following piece about 401k’s from SmartMoney’s Janet Paskin on the MSN Money website the other day. Kind of disturbing if you ask me. From the article:
With the economy and the markets showing tentative signs of a rebound, millions of Americans are focusing on their 401k plans with fingers crossed, hoping to make up the estimated $3.7 trillion that employee retirement accounts lost during the crash. But at all except the biggest companies, the men and women watching over those funds need no special qualifications, no investing expertise and no investment experience.
In practice, the job often falls to the company president, a human-resources manager or a committee of employees — in other words, people who are experts at something else. At one $54 million construction company in Idaho, the company’s founder runs the plan. His main qualification? Four decades in construction.
Ultimately, these people have authority over which funds will be offered, what fees employees will pay and how much education and advice workers will get. “Your performance depends on the decisions they make,” says Mike Alfred, the CEO of BrightScope, a California company that rates 401k plans.
Of course, few managers are truly flying solo. Nearly all hire brokers or consultants to suggest funds and make sure their plans comply with the law. Some administrators devote long hours and take courses to bone up.
But critics say that retirement planning has become too complex to be left to amateurs and that even hired help needs oversight. Brokers, for example, are not legally required to pick funds with low fees, so 401k plan managers who sign off on pricey funds could cost their workers tens of thousands of dollars over the long haul.
“They’re trying to do the right thing,” says Teresa Ghilarducci, the director of the Schwartz Center for Economic Policy Analysis at New York City’s New School. “But they’re not as competent as investment advisers.”
And even that’s not a given these days…
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Source:
Are amateurs running your 401k?”
Janet Paskin
MSN Money (via SmartMoney), November 3, 2009
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