Subscribe to erollover.com Blog by Email by The Associated Press www.Erollover.com 2008 Don't put your retirement plan totally on automatic September 9, 2008 Just because something's automatic doesn't mean you can totally sit back and relax; especially when it comes to your retirement. In recent years more companies have been shifting away from traditional pensions and placing the responsibility for retirement planning more squarely on individuals. As part of the move, many employers now offer automatic enrollment in their 401(k) programs and are changing the types of funds they offer. While these enhancements may be to your benefit, you'll still want to ask some important questions. Following are answers to questions about how those changes could affect 401(k) programs. My company has an automatic-enrollment 401(k) program that increases contributions over time and takes care of how the money is invested. Am I safe to just leave decisions to the plan administrators or shall I still be involved? Auto-enrollment programs have grown rapidly since the Pension Protection Act was signed into law two years ago. It has increased the number of workers setting aside money for retirement because it's easy. However, you should monitor your account and may need to make adjustments to suit your individual situation. "Most of the automatic decisions are good for employees, but employees still need to stay engaged in the retirement planning process, making sure that the decisions being made for them are in line with their retirement goals," said Christopher Jones, chief investment officer of Financial Engines, a Palo Alto, Calif., investment advisory and management company. Are target-date or life-cycle funds a good idea? Some say they can become too conservative too soon, reducing potential earnings. Target-date funds are an increasingly popular option in many employer retirement plans. The Investment Company Institute says target-date funds grew from about $2 billion in assets in 1997 to $183 billion in 2007. Roughly 5 percent of the assets held in employer-sponsored retirement plans are invested in target-date funds. These funds allow an employee to choose a retirement date - 2030, for example - and invest assets accordingly. Typically, the funds invest aggressively early on, aiming to earn higher returns, then become increasingly conservative, placing more of the money in safer investments - usually bonds - carrying less risk and usually lower returns. Should I be worried if my 401(k) administrator is replacing mutual funds with collective investment funds? Collective funds are similar to mutual funds in that they pool investors' money and invest in stocks, bonds and other securities. The biggest difference is that they are typically available only in retirement plans and are not regulated by the Securities and Exchange Commission. Instead, they are under the jurisdiction of bank regulators and the Department of Labor. Because collective investment funds don't have some of the regulatory requirements of mutual funds, they are less expensive than certain types of mutual funds. Thus, they may be offered through a 401(k) plan at a lower cost to participants, said advisers at The Vanguard Group. Please visit our site for more Retirement, 401k, and Insurance details: www.erollover.com Featured Sponsor:
