401(k)'s Have Lost a Step U.S. News & World Report (08/13/01) Vol. 131, No. 6 p.37; Lim, Paul J.
Employers do not offer enough variety in their 401(k) plans to protect employees from a faltering economy, which is why many accounts lost money for the first time in 2001. Of every five 401(k) plans, only two have a small-stock fund option, which includes small caps, bonds, and value funds. For instance, while S&P 500 blue-chips were losing 17 percent of their growth, investment-grade bonds were increasing by 11 percent. Many investment advisors state that a portfolio should have 30 percent of its funds invested in small-cap funds. Employees should lobby their finance and human resource departments for better options for their retirement plans in order to prevent large losses in the future. However, since the economic crisis many employers have begun adding more options, and those employees with fewer options can still invest in small-cap funds by withdrawing from the "in-service withdrawal" and reinvesting the money in either an IRA or a Roth IRA.