Myth: |
We have a mid-sized 401(k) retirement plan for our employees and there are no administrative costs for us or our employees. |
Reality:
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Your “free” plan is loaded with hidden costs, which can run as high as 3%. Have your plan expenses unbundled and reviewed by a qualified plan advisor to make sure you won’t be held personally liable for reimbursement of excessive costs. It is your fiduciary responsibility to make sure plan costs are appropriate for your plan size. |
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Myth: |
My plan is 404(c) compliant so I have already fully discharged my fiduciary responsibilities. |
Reality:
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You haven’t discharged your fiduciary responsibilities. 404(c) compliance only means that you have met basic education requirements for participants and named a minimum number of fund choices. It doesn’t address all fiduciary standards of care requirements including plan compliance, risk tolerance, time horizon, investment management selection, ongoing monitoring and documentation. |
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Myth: |
If you’re a young 401(k) plan participant, you should be aggressive. If you’re closer to retirement, you should be more conservative. |
Reality:
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Market cycles and conditions change. As they do, so should your asset allocation. No matter what age you are, you need to be properly diversified across the appropriate market sectors. Though your asset allocation mix could be right for your age, your investment choices could be wrong for the market cycle. All financial markets go through multi-year cycles where some groups outperform others. It is important to identify these cycles and accommodate them within your portfolio and desired asset allocation. |
