No Time, No Energy, No Comprende
Treasury & Risk Management Online (09/03) p.F4; Kelly, Susan

While the Bush administration has proposed setting aside a portion of Social Security funds in private investment accounts managed by workers, critics are concerned that employees are unprepared to sensibly invest their assets, as evidenced by the poor returns within their 401(k) plans. Employers often struggle to educate workers about their increased benefits and how investments should be made, and supporters of investment education contend that the right tools are not being employed. Only 78 percent of qualifying employees participated in their 401(k) plan offerings in 2001, and employers subsequently opted for automatic enrollment, which bolstered those numbers but failed to encourage workers to increase their savings rate or change their investment choices. Profit Sharing/401(k) Council President David Wray notes that because many employees are unclear about their investments, pension providers can offer participants automatic rebalancing to improve plan performance and control pension plan investment risks. One provider that offers an automatic rebalancing program says that it has improved the performance of those participants opting for the program. However, other experts note that participants should invest in maturity funds or lifestyle funds to get the most out of their retirement investments, which are rebalanced and revised over the investment period. In general, most workers appear to be seeking managers for their 401(k) plans, and are unwilling or unable to pay attention to the intricacies of investing in their retirement.


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