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September 11, 2009
It’s National 401(k) Day – Do You Know Where Your Money Is?
National 401(k) Day is an annual event promoted by the Profit-Sharing Council of America to highlight the importance of employer-sponsored retirement savings plans. It’s celebrated on the first Friday after Labor Day to remind people that retirement closely follows work.
Unfortunately, the market of the last decade has provided investors with little reason to celebrate – unless you were smart enough to focus on diversification and employ a systematic rebalancing program. Those smart investors, however, appear to be few and far between. A recent UCLA study found that only 7% of 401(k) investors described themselves as “aggressive” investors; yet 33% of them employed very aggressive asset allocation strategies by putting 80% or more of their account balance into stocks. At the Vanguard Group, 16% of 401(k) participants had every single dollar invested in stocks at the end of 2008; and, even more scary, Fidelity reports that 14% of 401(k) investors between the ages of 60 and 64 are 100% allocated to stocks. These folks were sitting ducks in 2007 and 2008 – and they remain so today.
The most telling statistic of all is that only 16% of 401(k) investors made any trades in 2008 – i.e., 84% of investors watched idly (and probably in shock) as their account values plummeted.
Use National 401(k) Day as an opportunity to review your asset allocation strategy and make changes where necessary. Remember, it’s your money so make sure it’s working as hard as you did to earn it.
Unfortunately, the market of the last decade has provided investors with little reason to celebrate – unless you were smart enough to focus on diversification and employ a systematic rebalancing program. Those smart investors, however, appear to be few and far between. A recent UCLA study found that only 7% of 401(k) investors described themselves as “aggressive” investors; yet 33% of them employed very aggressive asset allocation strategies by putting 80% or more of their account balance into stocks. At the Vanguard Group, 16% of 401(k) participants had every single dollar invested in stocks at the end of 2008; and, even more scary, Fidelity reports that 14% of 401(k) investors between the ages of 60 and 64 are 100% allocated to stocks. These folks were sitting ducks in 2007 and 2008 – and they remain so today.
The most telling statistic of all is that only 16% of 401(k) investors made any trades in 2008 – i.e., 84% of investors watched idly (and probably in shock) as their account values plummeted.
Use National 401(k) Day as an opportunity to review your asset allocation strategy and make changes where necessary. Remember, it’s your money so make sure it’s working as hard as you did to earn it.
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