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Changes to 401k laws


LC
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First they get rid of the fiduciary rule for financial advisors and now this. I highly doubt this will good idea for the average 401k participant.

 

The average person should just try to find a low cost broad based index etf or similarly low cost target date fund and call it a day. Too bad many fall into traps of "advisors."

:-\

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First they get rid of the fiduciary rule for financial advisors and now this. I highly doubt this will good idea for the average 401k participant.

 

The average person should just try to find a low cost broad based index etf or similarly low cost target date fund and call it a day. Too bad many fall into traps of "advisors."

:-\

 

Unfortunately the reality is not that simple. Many private employers do not offer good low cost index funds but only ETF's with high fee structure (my former employer did that unknowingly - thank you outsourced HR). Employees have no control in many cases and too much hassle to go outside to set up Roth IRA or something like that due matching contributions and other benefits from the employer.

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As someone who advises, although I dont know if Id call myself an advisor(I employ more of a "this is how I do things and you are either onboard or you're not; If you arent happy please take your money back" approach), advisors IMO are best suited for sophisticated investors who need help executing strategies and/or getting involved in exotic products they may need help understanding. It is downright dangerous exposing a normal, run of the mill person with little understanding of how the financial markets work, to an "advisor" who knows the lingo.

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First they get rid of the fiduciary rule for financial advisors and now this. I highly doubt this will good idea for the average 401k participant.

 

The average person should just try to find a low cost broad based index etf or similarly low cost target date fund and call it a day. Too bad many fall into traps of "advisors."

:-\

 

Unfortunately the reality is not that simple. Many private employers do not offer good low cost index funds but only ETF's with high fee structure (my former employer did that unknowingly - thank you outsourced HR). Employees have no control in many cases and too much hassle to go outside to set up Roth IRA or something like that due matching contributions and other benefits from the employer.

 

I get it. I seen plenty of shitty 1% (the most egregious was 2%) fee for a S&P 500 index fund and even more for active funds in some 401k plans. Even in those plans, contribute enough for match, if available. Then max out IRA and if have still money leftover, contribute to shitty fund in 401k.

 

The real problem to me is lack of financial literacy among the masses. Savings, budgeting, investing, debts of all kind.

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