Like a deer caught in headlights, individuals faced with too many choices in their company-sponsored plan freeze up and may end up taking no action for their retirement. They may end up making costly choices – or worse, no choices – for their retirement savings dollars.
Common costly choices typically include buying too much company stock or a mutual fund representing the same industry of the employer or loading up on small cap or growth stocks and avoiding bonds. Even young investors (under age 30) have as high a probability as older workers of not choosing any equity funds and only choosing a money market or bond fund for the bulk of their retirement savings.
Recent research completed by Columbia Business School and the University of Chicago Booth School of Business indicates that workers who are faced with too many investment options end up making decisions that can adversely impact their retirement. Often individuals will either make asset allocations that are unbalanced or choose to do nothing and leave their savings in cash and money markets.
This research highlights the need for individuals to seek out help from professionals who can offer guidance in allocation and rebalancing decisions.
Unfortunately, company sponsors do not have the staff, time or resources to provide this type of service. And sponsors – who are indeed acting as trustees for the participants in their plans – may simply believe that they are “all set” because the investment firm offering the investment menu can provide the needed help through their toll-free customer service lines or websites.
People need tailored help and guidance which is not something that either employers or investment firms are prepared to offer.
While not discussed specifically in this study, the increased use of auto-enrollment in company plans and Target Date funds has helped. At least individuals are “paying themselves first” by employers automatically enrolling them. And target date funds can at least offer a glide path with preset rebalancing decisions to the asset allocation mix.
But these one-size fits all solutions may not be best for everyone. This is where a fiduciary adviser can help out.
And this is why Clear View Wealth Advisors offers customized help for plan participants. Through one of my flat fee financial planning programs, individuals can receive customized help in choosing a proper mix of funds from among the plan choices and receive guidance on periodic rebalancing actions.
Retirement Plan Helpline: 978-388-0020