Ignoring Retirement Is Not a Plan

This lapse is madness, because it's free money. If all this motivates you to get serious about retirement planning, it's important to remember that there's no silver bullet. It takes a lot of thinking, hard work and discipline.

Instead of looking for an easy answer, look to those who have your interests in mind. As difficult as it may be for you to believe this, your employer is among this group. That's because virtually everyone at your company is in its 401(k) plan, including top executives. If you do well in your plan, it doesn't hurt them one whit. And they want to have good choices among the investment options in the plan as much as you do. So this is a scenario of mutual interest.

To take advantage of your plan:

• Attend educational sessions arranged by your company and seek individual help from independent plan advisors, when it's available.

• If your company doesn't offer employees help from a truly independent advisor.

• Use available resources and materials to learn about the different investments your plan offers and how they work — or don't work — together as a portfolio. Your portfolio (and if all you've got is a 401(k) plan, that is your portfolio) should be fully diversified.

That means your assets should be spread over different types of investments and, within the same types of investments, in different types and sizes of companies (as with stocks). If you own shares in four stock mutual funds offered by your plan, is there substantial overlap in the stocks these funds own? If so, you're not adequately diversified and you have little protection if the companies that you're unwittingly overinvested in should tank.

• Become familiar with the fees charged to your plan and the investments you hold. These can significantly affect your net returns over time. The federal government has issued new regulations requiring full disclosure of fees deducted from your account by plan providers (companies that hold plans for sponsoring employers – typically, insurance companies) and companies that provide investments for these plans.

The disclosure of these fees in your quarterly account statements is much murkier than the new rules had intended, but your employer is supposed to have this information.

It's important to get good advice, but it's also important to learn things for yourself — because it's your retirement, and no one else's.

Anthony Kippins is president of Retirement Plan Advisors, Ltd. a Registered Investment Advisory firm that addresses the needs of retirement plans and the employees who invest in them. An Accredited Investment Fiduciary Analyst (AIFA®) with more than 30 years of experience domestically and abroad, Kippins specializes in providing fiduciary advice to retirement plans on governance, investments and educational services. He also advises individual clients on retirement planning and investment management after retirement. He can be reached at rpa@retirementplanadvisorsltd.com. If you have a question for Kippins about 401(k) plans, please send email it and he will try to answer it in an upcoming column.

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