Is It Time for Better 401k Oversight?
March 26, 2009 by Miranda Marquit
Filed under Finance
Timothy Geithner wants to increase government regulation of such investment vehicles as derivatives, money market mutual funds and hedge funds. The thinking is that deregulation and opacity in many financial instruments is one of the reasons we’re in the middle of a financial meltdown. Since it was impossible for regulators and evaluators to assess a value for some of these assets, and since transparency was not a priority, the heavy leveraging eventually led to insolvency.
But perhaps it’s time to take a look at all investment vehicles — not just those we think of as complicated. It’s nice to change the way things are done with regard to complex investments that few “regular” folks invest in. But what about an almost equally opaque investment that nearly everyone uses? It may not be intricate, but maybe it’s time to look for better 401k oversight.
401k managers rarely consider what is going into retirement plans
MarketWatch reports something that is somewhat discouraging with regard to company sponsored 401k plans:
Just look at the results of a new survey: Barely half of retirement-plan sponsors even bother to take minutes of the meetings they hold at which they decide the fate of your money. And barely one-quarter ever use an outside party to analyze the fees your are paying for the funds offered — fees that can make a huge difference in how much money you end up with at the end of your career.
Take charge of your 401k retirement plan
Instead of relying solely on your company to take care of your 401k or other retirement plan, do your own homework. Find out whether you can choose the investments that go into your plan (many company plans allow you to determine a large portion of your allocations). Also, review the fees. It might be that you can find a better plan elsewhere. If your company has stopped providing a match (as many companies have), you might look at your options. There are ways to switch to a retirement plan that isn’t company-sponsored if what your workplace offers doesn’t suit you. You can talk to a fee-based financial planner to help you evaluate your options.
Most 401k plans I’ve been in provide the employee a limited set of choices for investment options, some good, some not so good. I don’t really want the government screwing up 401k plans, as only they can do. However, I would like a broader range of investment options from my employer so I could use my own good sense in determining investments and asset allocations.
I think that’s sort of the point. Employer’s would have to let you have more options, rather than having a slipshod meeting that no one really cares about.
I’ll take a pass on any help from the government. Too many unintended bad things happen when they get involved.