SAN DIEGO (ETFguide.com) - These are trying times for America's
401(k) savers. The average 401(k) balance for a participant in
their 60's, according to Hewitt Associates, is around $93,000.
That's barely enough to last some people a few years.
On top of that, companies have cut or eliminated matching
'For too many Americans, 401(k) plans have become little more
than a high stakes crap shoot,' stated House Education and Labor
Committee Chairman George Miller. 'We are realizing that Wall
Street's guarantees of predictable benefits and peace of mind
throughout retirement was nothing more than a hallow promise.'
What can you do to fix your retirement plan?
Stop Overdosing on Company Stock!
By now, the epic collapse of AIG (
), Citigroup (
), General Electric (
) along with a long list of other individual stocks should've
taught everyone about the hazards of over-concentrating one's
retirement money on company stock. Are people listening? The
surprising answer is no.
Instead of reducing their financial risk to individual stocks,
new evidence shows that 401(k) investors have gone absolutely mad
out of their minds. In January 2009, Hewitt Associates reported,
that millions of 401(k) participants put more money into company
stock than in any other single retirement plan option, including
conservative bond funds. No wonder so many retirement plans have
been roasted beyond recognition! People are repeating their
mistakes by overdosing on company stock. How much more money will
they need to lose before they stop?
Don't Leave Your Money Behind
Most people would never think of leaving their wallets and purses
unattended, yet millions are doing that with their 401(k) plans. If
you've been let go or recently left a job, did you remember to take
your 401(k) money with you? Don't make the fundamental mistake of
leaving your valuable retirement money with an ex-employer. Did you
know that leaving your 401(k) money behind limits your menu of
investment choices? It also places severe handicaps on your
retirement plan distribution options.
Alert 401(k) investors have taken the decisive step of rolling
over their retirement money into a traditional IRA account. This
allows them to avoid IRS tax penalties associated with pre-mature
retirement distributions. It also allows them to control their
retirement future and to invest in other effective investment
options, like low cost index ETFs.
Diversify Beyond your 401(k) Plan
Many 401(k) plans claim to offer diversification, but the facts say
otherwise. For example, most 401(k) plans fail to offer workers
market exposure to major asset classes like commodities (NYSEArca:
GSG), gold (NYSEArca: GLD), international bonds (NYSEArca: BWX) and
international real estate (NYSEArca: RWX). We are entering the kind
of financial and economic turmoil where a traditional mix of
stocks, bonds, and cash may be inadequate.
True diversification begins with broad market exposure to major
asset classes, not just stocks and bonds. Unfortunately, the
product structure of mutual funds does not accommodate assets like
gold or commodities. In contrast, these key areas can be reached in
a cost effective manner, via exchange-traded funds (ETFs). Isn't it
time that 401(k) plans start offering ETFs as a main investment
option? What are lawmakers and third party admistrators (TPAs)
Speaking about the shortcomings of 401(k) retirement plans, Alicia
Munnell Director of the Center for Retirement Research at Boston
College said '401(k) plans were asked to do something they were
never intended to do. They were supposed to be a supplementary
retirement plan for people who already had traditional pension
plans but instead it's been asked to serve as the main supplement
to social security. It wasn't designed for that.'
If you're stuck in a 401(k) plan with inadequate investment
choices, high fee funds, no matching employercontributions and a
deadbeat boss that doesn't care, it's time to fight back! It may be
time you consider investing outside of your 401(k) plan. Consider
401(k) alternatives like traditional IRAs and Roth IRAs. The latter
will allow you the financial flexibility of investing in low cost
ETFs that give your retirement portfolio better investment
Don't be confused, startled or distracted by the madness of the
financial markets. Reaching your financial goals with the least
amount of cost, taxes, and risk can be achieved!