A 401(k) Fallacy
Money (06/02) Vol. 31, No. 6 p.56A; Rekenthaler, John

A study examining 401(k) returns for several financial services companies between 1995 and 1998 argued that plan participants had made poor investment decisions based on plans' average gain of 13 percent per year, and the plans' performance gap. A re-examination of 401(k) plans over a wider period, however, shows an alternate view. By computing the years 1999 and 2000 into the computation of losses for one financial services company, Morningstar, the author argues that the company's 401(k) plan only trailed the national benchmark by 2.5 percentage points. This new perspective notes that, except for expenses, the average 401(k) participant matched the market, and refutes the original study's argument that participants made unwise investment choices.

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