Here's a piece from Money Central that suggests the seven hot 401k trends:
Making retirement saving automatic. A growing number of companies have decided to harness workers' inertia by making 401(k) enrollment automatic: Employees have to opt out if they don't want to participate.
Simplifying your investment choices. 65% of the companies Hewitt surveyed now offer some kinds of "life cycle" funds, which tailor investments to a person's age, or "target maturity" funds, which make investments geared to a worker's planned retirement date. In general, these funds automatically rebalance investments and gradually reduce exposure to stocks as the employee approaches retirement.
Red-flagging company stock. The temptation to overdose on your own company's stock can be strong. Familiarity breeds comfort. Many 401(k) investors think (wrongly) that their own companies’ shares are safer than a diversified mutual fund.
Containing the fees. About half the employers Hewitt surveyed said they were looking into ways to reduce plan costs.
Stemming cash-outs. As I mentioned in "The 7 most common 401(k) blunders," the second-worst thing you can do with a 401(k) -- after not contributing -- is cashing out when you leave a company. Yet that's exactly what 45% of workers do.
Getting some advice. Companies used to balk at the idea of telling their employees how to invest, fearful (as always) that they'd get sued. Labor Department guidance and the spread of inexpensive Internet options is gradually making companies more comfortable with the idea, however.
Implementing the Roth 401k. Employers aren't exactly falling over themselves to offer the new Roth 401(k)s, but that could change as workers begin to understand their value.
My thoughts:
1. David Bach would love idea #1. I like it too. Sometimes you need to protect people from themselves, and if they're not smart enough to sign up for a 401k, then I'm fine with them being automatically signed up.
If you are unconvinced, here are some posts on how great the 401k is:
2. As you know, I invest in index funds. It doesn't get much simpler than that. Plus, index funds keep your fees low (point #4) and take little time to manage (and are easy) . Besides, they come highly recommended by people who manage billions and investment pros.
3. You have to diversify your portfolio and loading up on company stock is as bad as loading up on any other stock.
4. Fees can kill your return as fast as anything. Guard against them and your results will be that much stronger.
5. This point absolutely floors me. 45% of workers cash out of their 401ks? This is madness! It's totally unbelievable. Why is this -- are people just over-spending and need the money or do they simply don't understand the impact of decisions like this?
6. If you need financial advice, be sure you hire someone who knows more than you do and not someone who's a salesperson or a loser.
7. I think the jury is still out on the Roth 401k as it appears that businesses are taking a wait-and-see attitude.
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