Who is managing your 401k risk?

One of the great joys I get in this business is talking to participants in 401K's and feeling the relief that they get knowing that they don't have to manage their investments alone.

A lot of participants were under the impression that the mutual funds in their retirement plans which are professionally managed, had a built in management strategy in different market environments. They figured that these managers had a game plan to protect their retirement account values when the stock market begins to decline.

They seem surprised when I tell them that its not true. These managers don't manage stock market  risk. If it is stock fund they are managing stocks, not market risk. That job is left to you.

Unfortunately most retirement plan participants are not qualified to manage this risk. The sad part is that they don't know that until their account drops by a large amount.

It's really no different than calling a plumber to fix a leak or taking your car to a mechanic for a tune up. The only difference is that cost is a minor out of pocket expense while mismanaging your 401K can cost you thousands of dollars down the road.