Your 401(k): Benefits of Starting Early

Your 401(k) could make you a millionaire. By making small, regular investments starting in your 20s or early 30s, your savings will grow tax-free for 30 to 40 years. Unfortunately, people tend to procrastinate because they are focused on bills that are due today and the things they want right now. We human beings are notoriously bad at wrapping our minds around far off events.

When it comes to investing, time is a big advantage. Here are three reasons why.

How to Diversify Your 401(k)

When it comes to trying to reduce risk in your 401(k), the phrase "don't put your eggs in one basket" applies. Therefore when selecting investments, it's important to diversify.

The Downside of Passive Investing

Earlier this month, I was invited to make an appearance on CNBC's "The Closing Bell" to discuss the topic "Is this the end of a stock picker's market?" I enjoyed the lively debate with Ross Gerber and Evan Newmark. In case you missed it, click the video link below. Since one can only say so much in a 4 minute segment, I'd like to share some additional thoughts with our loyal Runnymede readers.

Many articles have been written about the shift from active to passive investing. The thesis is simple. The majority of active mutual fund managers underperform their index and also charge a higher fee. This is a double whammy for an investor's bottom line. Therefore, the solution seems simple: move your money into low cost index funds and that should lead to higher returns over the long term. Unfortunately, it's not that easy. Let's take a look at the potential pitfalls of passive investing.

401K Providers: 2016 Top 20 Lists


Editor's note: There is a more up-to-date version of this article at 401k Providers: 2017 Top 10 Lists. Thanks!


Plan sponsors, that is companies that offer their employees a 401(k) plan, have many choices when selecting service providers for their defined contribution plans. The challenge for many businesses, especially for small businesses, is that the day-to-day running of their businesses leaves little time to review, monitor, and optimize their retirement plan. The result is that many plan sponsors lack a comprehensive understanding of who the top 401k providers are. PLANSPONSOR magazine conducts an annual recordkeeping survey profiling top providers. Here's their list of the 2016 top 401(k) providers and a few of my thoughts.

Plan Sponsors: How to Review Plan Costs to Avoid Lawsuit

If you're a plan trustee, I hope you're paying attention. Employees have been increasingly active fighting against "excessive fees." Just in the 4th quarter of last year alone, there were eleven major class-action lawsuits filed in federal courts against 401(k) sponsors or providers of retirement products. Most suits allege that participants’ retirement savings were compromised because employers, as plan fiduciaries, failed to act in participants’ best interests and breached their duties under the Employee Retirement Income Security Act (ERISA) by allowing high fees, poor fund choices, and conflicts of interest.

If you are among those who thought only multibillion-dollar plans (Cigna, Edison International, ABB, International Paper, Boeing, Lockheed Martin) were at risk because small- and mid-sized plans won't get sued, think again. A new class-action lawsuit was filed in the Minnesota federal court targeting excessive 401(k) fees in a $9.2 million plan with 114 active participants. Damberg v. LaMettry’s Collision Inc., claims that plan fiduciaries breached their duties under ERISA for allowing excessive fees to be charged for plan investments, record keeping, and administration.

401k Fees: An Employee Checklist

18-years ago, I worked for a company whose 401k offering had high fees, poor investment choices, and poor service. Employees felt powerless with exception to trying to ask good questions at the meeting once a year when the 401k provider came in. Unfortunately, our questions were never well answered and our employer did not hear our desire for improvements to the plan. The good news is that those days are fading quickly and employees are increasingly empowered.

Employees Advocating For Fiduciary Duty

Defined contribution plans like 401k's transferred a lot of responsibility for managing one's retirement investments from the employer to the employee. In an effort to best achieve retirement goals, it makes sense for employees to also be involved in fighting back against high 401k fees and for better investment options. After all, you've got to fight for your own self-interests.

Taking Too Much Risk May Sink Your Retirement

Thanks to the Fed's zero interest rate policy (ZIRP), baby boomers are facing a much tougher road to retirement than those in the past. While it may seem like an eternity, it was only 10 years ago when you could park your money in a savings account and earn interest of 5%. Retirees who worked hard and saved their money could safely invest their assets in retirement and not have to worry about suffering any losses.

Today is an especially challenging environment for investors who are looking to generate a safe income stream. No Treasury bond will pay a safe 5% return as a 30-year Treasury Bond yields just 2.69%. This is causing a massive gap between what boomers say they want in retirement and what they're doing to make it happen.

401K Providers: 2015 Top 20 Lists


Editor's note: There is a more up-to-date version of this article at 401k Providers: 2017 Top 10 Lists. Thanks!


The good news is that plan sponsors have many choices when selecting a recordkeeper for their defined contribution plans. The challenge for many businesses, especially for small businesses, is that day-to-day running of their businesses leaves little time to review, monitor, and optimize their DC plan. The result is that many plan sponsors lack a comprehensive understanding of who the top 401k providers are. PLANSPONSOR magazine conducts an annual recordkeeping survey profiling top providers. Here is their list of the 2015 top 401k providers and a few of my thoughts.

Why 401K Education is Important

"An investment in knowledge pays the best interest."
     - Benjamin Franklin

Your 401K plan can be a beautiful thing. With the benefits of favorable tax treatment, employer match programs, investment customization, portability, and loan and hardship withdrawals, the 401K empowers employees with a vehicle to grow their nest eggs for retirement. Trouble is you never learned about how to manage a 401K account in school. It's like your parent tossing you the car keys on your seventeenth birthday, telling you to drive cross country, and walking away. You're in charge of your financial destiny but you don't have the training or time to properly care for it.

Just say No to front end load mutual funds

When we started the Runnymede blog a couple of years ago, our number one priority was to educate investors about investments and finance. Since then, we have received hundreds of questions. We take pride in answering each and every one of them.

Last week, I reviewed a woman's investment portfolio who asked, "Are my fees huge for the investments that I have?" After a bit of quick research, I was shocked by the results. In fact, it nearly made me sick to my stomach. Her retirement accounts held five mutual funds and all of them had outrageous front-end load fees. Here is the shocking truth:

IMPORTANT DISCLOSURE INFORMATION 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

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