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Monday, August 2, 2021

The importance of explaining 401k-related calculations to plan participants

It is often difficult to keep up in the modern fast paced world. Many people sign up for their company’s 401(k) plan and then do nothing, thinking that the plan will automatically take care of everything. But it will not fly on its own like some fire-and-forget missile. Plan participants need to take on an active role in managing their 401(k) for the benefit of their financial future. There is so many different factors when it comes to retirement plans that participants should be ready to take on:

  • Checking statements and monitoring the returns of 401(k) investments;
  • The awareness of the fees paid by the plan;
  • Monitoring raises and consequent contributions to not fall behind in savings;
  • Watching and mixing investments (or “asset allocations”) over the years, as the retirement date gets closer;
  • Taking full advantage of the employer matching contributions…

…and so many other little things that RIAs and Plan Fiduciaries should help participants to carry on through their long journey to a comfortable retirement.

Knowing and understanding the basics of retirement plans may not be as easy as it seems to unsuspecting retirement participants, and this is where the language of numbers comes in to play by helping to eliminate a hurdle in 401k education. Ackley Associates shed some light over a mystery of 401k math (Math Without Meaning: A Hidden Flaw in 401k Education), and help plan advisors to educate employers and employees in a simple and coherent manner.


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