I just read the most recent Fidelity Investments study. The information reinforced the three main problems currently facing individual company 401(k) retirement plan participants.
The first problem is the lack of will. Most individual company 401(k) retirement plan participants still try to manage their company 401(k) retirement plan accounts on their own.
The same professional investment advice you receive on your personal stock and bond investments is also available on the menu of mutual fund options in your company 401(k) retirement plan account.
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Managing stock and bond market investments is hard. I would last about ten minutes trying to do the jobs of my doctor, lawyer, engineer, and consultant clients. The same can be said about any professional trying to manage their company 401(k) retirement plan accounts.
The second problem is the lack of skill. Individual company 401(k) retirement plan participants don’t have the investment management experience necessary to pick individual mutual funds.
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Individual investors don’t have the discipline to manage stock market risk. They are underinvested in the early stages of a stock market advance. And they are overinvested as the stock market begins a quick and painful decline.
The third problem is being too chill. Individual company 401(k) retirement plan participants are much too calm and easy going about their comfortable retirement prospects. The money in their company 401(k) retirement plan account represents the largest part of their retirement savings.
You can’t manage your personal finances on auto-pilot. Stock and bond market investments need frequent attention. The result of inattention is too much money invested in a collection of the worst company 401(k) retirement plan menu options.
The U.S. stock market is near all-time highs. The three investment management conditions listed above need to be corrected before the next great stock market decline.
Find the will. Hire the skill. Don’t be so chill.