News Reality

Don't Touch the Third Rail of Your 401(k) Plan

by www.huffingtonpost.com
In The Smartest 401(k) Book You'll Ever Read (which I wrote in 2008), I lamented the sorry state of 401(k) plans. My recommendations I noted they were beset with bloated fees. The investment options were often dominated by expensive, actively managed funds, likely to underperform less expensive index funds over the long-term. I recommended a total overhaul of the system. My suggestions included a requirement that all 401(k) plans offer participants an array of low management fee Target Retirement Funds and a broad range of low-cost index funds, or ETFs, similar to those in the federal employees' Thrift Savings Plan. I also recommended prohibiting the common practice of "revenue-sharing", which permits fund families to pay fees to plan sponsors and other vendors to the plan as the price of gaining admission to the investment options offered by the plan. Limited progress Since the publication of my book, there has been limited progress in reforming this broken system. Most notably, the Department of Labor -- in a move vigorously opposed by the securities industry -- enacted a rule requiring advisors to retirement plans to put the interest of plan participants ahead of their own, and to disclose all conflicts of interest. The plaintiff's bar, led by Jerome Schlichter, at the St. Louis law firm of Schlichter Bogard & Denton, have brought a series of lawsuits against sponsors of retirement plans, alleging these sponsors breached their fiduciary duty to participants by failing to monitor fees and expenses. These cases resulted in settlements totaling $926,500,000 in 2015. The increase in litigation against plan sponsors has caused them to review fees, costs and investment options. While there's still a long way to go, hard working employees will be the beneficiaries of this welcome trend. Traps for the unwary While these are positive developments, there remain traps for the unwary. Most plans are still dominated by a confusing array of actively managed funds as investment options. In my 401(k) book, I included a "cheat sheet" to help participants find lower cost alternatives, if available. My analog efforts have been replaced by a digital one. A relatively new start-up, FeeX, has automated the process of finding out how much you are paying in fees in your plan and other deferred accounts, and suggests lower cost mutual fund alternatives to those you are holding. I previously wrote about FeeX in this blog.. In stark contrast to FeeX, there's a continuous stream of information in the financial media that is potentially harmful to your retirement returns. One of many examples is this recent article posted on the website of CNBC. The author believes, "A self-directed brokerage account is the most underrated investment option in a 401(k) plan." He correctly notes this option offers participants a "brokerage window" where they can trade investments (stocks, bonds, mutual funds, etc.) that aren't in their plan's official investment lineup." I can't think of a worse idea. First, participants wouldn't need access to other investments if the ones in their plans were suitable in the first place. Second, giving participants the unrestricted ability to trade on their own is a recipe for disaster. Most people are terrible at investing, often buying high and selling low. This depressing chart demonstrates why employees should not be trading on their own if they want to retire at all -- much less with dignity. In my view, self-directed accounts are like giving drugs to an addict. They don't belong in any retirement plan. If they are in yours, don't go near them. They are the third rail in your plan. The views of the author are his alone. He is not affiliated with any broker or advisory firm. Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.

-- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.


Read Full Article On www.huffingtonpost.com
Latest
Accused promises to disclose names of police officers and wardens in the scam.
The Government has signed a deal that will see Cuban health specialists hired to address shortages.
Gulf African Bank (GAB) has launched an initiative to raise awareness on procurement opportunities and access to trade finance.
KCB Bank has been named the Best Regional Bank in East Africa at the just-concluded African Banker Awards 2017 in Ahmedabad, India.
Kenyans should not expect much relief on high food prices despite a number of measures the Government has put in place to address the situation.
China is investing billions in Sri Lanka, but many local citizens feel the country is being sold to the Chinese.
China is behind the bulk of infrastructure development on the island of Sri Lanka - and many young Sri Lankans see opportunity in the growing links between the nations.
Share Lab uses flow charts and data analysis to map one of the greatest forces shaping our world - Facebook.
Payday lenders now have to advertise on at least one price comparison site under new rules.
To make its mobile app as indispensable as possible, Facebook has introduced live streams, a booming virtual bazaar and free access to some of the best journalism. But among the major missing piec
During a meeting with top leaders of the European Union, President Donald Trump said “the Germans are bad, very bad,” according to participants in the room who spoke to German newspa
Earlier this month, I attended Intel's first Autonomous Driving Workshop in San Jose, where press and analysts enjoyed demonstrations and talks from both Intel, and a handful of their partners—BMW, De
Taking a jibe at the meeting called by Congress chief Sonia Gandhi to discuss the opposition's presidential candidate, the Bharatiya Janata Party (BJP) on Friday said the grand old party wants to keep
LITTLE ROCK, Ark. (AP) — Patti Upton, founder of home fragrance company Aromatique, has died in Arkansas at age 79. Family Funeral Services in Heber Springs says Upton died Tuesday at her home in the
Potential long-term U.S. LNG supply contracts with China could help reduce pollution and make natural gas the world's most important fuel in a carbon constrained world.
PlateJoy, a meal planning startup, announced its Las Vegas launch Thursday morning.
Mark Fields, the former CEO of Ford and who was ousted this week, could get a payout valued at $57.5 million, according to Bloomberg.        
A city searches for a little lost lamb.              
BOISE, Idaho - The reputation of what is generally considered Idaho's premier and nationally renowned fly fishing destination has taken a beating after three years of drought, but Silver Creek ......
Federal prosecutors charged Vitaly Borker, who spent over three years in prison for threatening customers of his previous online business, with wire and mail fraud.
Business Reporter INDIAN firm, Jaguar Overseas, is still battling to secure $70 million funding required to rehabilitate Harare Power Station three years after the company won the multi-million dollar
Business Reporter GOVERNMENT is working on measures aimed at curtailing the rampant smuggling of goods into the country. Industry and Commerce Minister Dr Mike Bimha told The Herald Business that Gove
First Merchant Bank, which is bidding to take over Barclays Bank Zimbabwe, has torched a storm in Malawi amid allegations of racism at the financial institution. Newspaper reports from Malawi say staf
The online retail giant increases its physical presence as its seventh outlet opens for business.
Isdore Guvamombe Tourism Matrix The best candidate lost! It was a very bad experience by any imagination and I understand why so many armchair theorists blindly jumped onto it, from their positions fa
Today the examiner wants to offer a few study tips to help the candidate adequately prepare for the ZIMSEC Ordinary level and Advanced Level and any other examination they may be sitting for this mid-
China's discovery of a unusual energy source under the sea won't butt into the claims of other countries but will still raise stakes in an already tense maritime sovereignty dispute.
The alleged culprit in a deadly concert bombing was driven by what he saw as unjust treatment of Arabs in Britain, a relative has said, confirming he made a final phone call in which he pleaded: "Forg
Otto became “Uber ATG trucks” in April as a high-stakes legal fight with Alphabet Inc.’s Waymo played out in court. The change was made with little fanfare following an unrelated trademark infringemen
Excited to be profiled in the September issue of @HarpersBazaarUS. Be sure to check it out online, and grab a copy when it hits stands! (Dress + Jewelry #IvankaTrump) #WomenWhoWork A post shared
Malta has tried to shake off claims it is the "Panama of the EU" - but the EU is worried about its tax system.
In order to change the mentality of women prisoners here, the Odisha Government has started various reforms in jail.The women prisoners of the Sambalpur Nari Niketan celebrated Sabitri Festival by wea
CSO figures for overseas tourism have shown a mixed picture for February to April 2017.
Three male prison guards repeatedly sexually assaulted and raped several female inmates under their supervision at a federal detention center in New York over time periods of up to three years, federa

Recent News

Boys’ lacrosse Top 10: Severna Park climbs rankings after state title win

Landon holds the top spot, Briar Woods slides up and Northern cracks the rankings. 
Read Full Article

Trade Ovechkin? Why the Caps almost certainly won't do it.

Pundits clamored for Washington to consider trading its captain following another playoff flameout. The solution does not seem particularly feasible.
Read Full Article

Review: Morgan returns with Netflix ‘Staying Alive’

I laughed at times, winced at others, but Morgan stays mostly within bounds        
Read Full Article

Olivier Rousteing hits L’Oréal Paris Cinema Club party in Cannes

Fresh from attending the Philipp Plein resort show, Eva Longoria hit the L’Oréal Paris Cinema Club party at Cannes’ Martinez Beach on Wednesday night, kicking off her shoes to dance on a chair. Th
Read Full Article

On the Town: Danny Mac stars in open air version

The Strictly finalist stars in a new version of the Hollywood classic On The Town.
Read Full Article

The Latest: Poland ready to boost military help in Mideast

The latest on the NATO summit in Brussels (all times local):
Read Full Article

The Latest: Trump to review US sanctions on Russia

The Latest on President Donald Trump’s first trip abroad (all times local):
Read Full Article

Trump calls for investigation of U.S. leaks in Manchester bombing probe

In Brussels, Trump responded to British outrage over the leaks and vowed to “get to the bottom of this” to preserve intelligence sharing.
Read Full Article

Libya becomes a key focus of the Manchester bombing probe

Investigators want to learn if Manchester bomber Salman Abedi received training or help from Islamic State operatives in the North African country but face major obstacles.
Read Full Article

Popular Finance

Deon Toliver is new football coach at Dominguez

Read Full Article

LAFC's $30-million commitment to training complex third-highest in MLS history

LAFC’s plan to spend $30 million on a training complex on the campus of Cal State Los Angeles would make it the third-largest investment in a practice facility in Major League Soccer history. Only
Read Full Article

Alabama's 'Houdini of death row' once again scheduled for execution

Called the "Houdini" of death row, Alabama inmate Tommy Arthur has been scheduled to die Thursday, after seven postponements.
Read Full Article

A body slam, an assault charge and suddenly a Montana congressional race appears up for grabs

For John Jepsen, Glacier National Park could wait a bit — especially if it meant keeping Greg Gianforte from a seat in Congress. Jepsen had planned to head to the park Thursday, but when he learne
Read Full Article

California guards and inmates are recovering after a mass attack

Four inmates remained hospitalized with gunshot wounds Thursday, a day after California correctional officers opened fire to quell a rare mass attack on eight prison guards by more than 100 inmate
Read Full Article

Trump is dealt another defeat on travel ban as U.S. appeals court in Virginia blocks enforcement

President Trump suffered another legal defeat Thursday when the U.S. appeals court in Virginia ruled his foreign travel ban may not be enforced, on the grounds that it appears to discriminate base
Read Full Article

California Senate, Assembly advance their own plans on how to spend tobacco tax revenue

Read Full Article

Melania Trump chooses Maison Ullens for Brigitte Macron meeting

Just as she had chosen the Italian label Dolce & Gabbana for Wednesday’s meeting with Pope Francis in Rome, First Lady Melania Trump once again paid tribute to the host nation by wearing a Belgian
Read Full Article

Thief steals car with toddler inside after mother runs back into home to retrieve item

A mother and her 2-year-old son were reunited Thursday after a man stole a car with the toddler inside. The mother had been preparing to leave when she realized she left an item in her apartment.
Read Full Article