Does Your 401(k) Need to Be Protected?


When choosing among the mutual funds, target-date funds and other investments offered in a 401(k) plan, nobody sets out to select a costly investment that could affect their future. But, according to law professors Ian Ayres of Yale University and Quinn Curtis of the University of Virginia, that’s often exactly what can happen. Taking personalized care of your retirement accounts can help you avoid these scenarios though, along with educating yourself on the potential long-term harms.

Do you have questions about building a retirement plan for the future? Speak with a financial advisor today.

Where This Idea Came From

“Employees are often their own worst enemies,” Ayres and Curtis wrote in a recent column in The Wall Street Journal. “The problem – as we have learned by studying the portfolios of thousands of employees in a large institutional plan – is twofold. First, many employees put their portfolios at risk by failing to diversify their investments. And second, many choose investment options with relatively high fees that eat into their returns.” 

The problem, according to Ayres and Curtis, is that plan administrators hide expensive funds charging high fees in the workplace plans they design. On top of that, they assert that employers don’t do enough to educate employees about how to select their investments.  

Take the case of a narrowly constructed mutual fund, which invests in a small niche of the stock market or even just a single commodity and are designed to add diversity to a portfolio. The authors found that 22% of workers with portfolios that included a narrow fund put more than half of their money in that fund, which adds plenty of real risk. In one plan the authors studied, 35% of the participants had more than half their money in a gold fund, including 11% who put all of their money in the fund.  

The solution, Ayres and Curtis write, is to add rules that limit investments in narrow funds or eliminate them entirely if investors are putting too much money in them. But investors don’t have to wait for those guardrails to be put in place to take action.

Consistently Monitor Your Investments

Successful long-term investing often doesn’t entail a “set-it-and-forget-it” process. You’ll need to keep an eye on your 401(k) holdings over time, in terms of both asset allocation and investment costs to ensure they fit within your overall financial plans as they evolve.

Younger investors, for example, may want to put 100% of their money in stocks because they have decades to go until they retire, and can therefore afford to be riskier with the hopes of higher returns. Once those investors are 40, however, experts advise adding bonds to stabilize the returns as you get closer to retirement.

Rebalancing your investments at least once a year to maintain your intended allocation of stocks and bonds is also incredibly important. Rebalancing becomes necessary as investment prices rise and fall, the change in values can result in you being over-invested in one particular area and under-invested in another. Rebalancing restores your original allocation, reduces risk and can improve your returns.

Review and Update Your Asset Allocation


Make sure your asset allocation is coordinated with the allocations of your other investments. Avoid funds with high fees by getting that information from plan administrators, including fees charged by the funds. These can really eat into your returns over the long term. 

One option is to structure your investments along the lines of a model portfolio, which provides a breakdown of different types of funds for a diversified portfolio. For example, the classic 60/40 portfolio puts 60% of invested cash in an array of stocks and 40% in a selection of bonds. There are other similar options too, such as 70/30, 50/50 etc.

Bottom Line 

Long-term investors should understand how asset allocations, fees and other expenses can help or hurt the returns within their 401(k) accounts. Avoid concentrating too much money in one particular fund or type of fund, which can create too much risk in your portfolio of funds. Diversification is key to keeping your portfolio healthy over the long term, as well as helping to avoid the major ups and downs that can sometime befall the investment market.

Retirement Planning Tips

  • A financial advisor can help you build a comprehensive retirement plan that accounts for taxes, Social Security and more. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Photo credit: ©iStock.com/Edwin Tan, ©iStock.com/ARMMY PICCA

The post Does Your 401(k) Need to Be Protected? appeared first on SmartReads by SmartAsset.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



Source link

Visited 1 times, 1 visit(s) today

Related Article

Slender Honor MagicBook Art 14 2025 design shown off in official images

While the Honor Magic V5 is getting most of the attention, next week’s event will feature several other new devices. Honor already shared official images of the MagicPad 3, now let’s have a peek at the Honor MagicBook Art 14. Honor MagicBook Art 14 2025 More specifically, the Honor MagicBook

Study Finds Link Between Instant Coffee and Eye Disease Risk

A new genetics study found that drinking instant coffee may significantly increase the risk of developing dry age-related macular degeneration (AMD), a leading cause of vision loss in older adults. Published in the Wiley journal Food Science & Nutrition and led by a research team from multiple universities in China, the study found no such

iOS 26 Beta 2 tones down the Liquid Glass effect

Apple has released its second iOS 26 beta to developers, and the latest update tackles several user complaints associated with the new Liquid Glass design. There’s a more pronounced blur option for Control Center, which regulates the new Liquid Glass effect. The background uses a darker shade and adds more blur to help with legibility.

Future of Coffee Machines Market: 2025-2034 Analysis

According to a recent report by Expert Market Research (EMR), the global coffee machines market is expected to grow at a CAGR of 4.10% during the forecast period of 2025-2034. Driven by consumers’ evolving tastes and rising expectations for premium coffee experiences, the market is projected to witness substantial expansion by 2034. Coffee machines, from

Tecno Spark Go 2 brings updated design and affordable pricing

Tecno’s latest entry-level device is here with the Spark Go 2. As its name implies, this is the successor to last year’s Spark Go 1 and most of the key specs are identical between the two. Tecno Spark Go 2 in Ink Black and Titanium Grey Spark Go 2 does get an

Poco F7 price leaks ahead of today’s announcement

The Poco F7 is almost here – the big announcement is scheduled for later today. That said, Poco took a slightly weird approach with this launch and it sent us review units to unbox early – here is the Silver version and the Black version. Poco F7 in Silver and

vivo T4 Lite arrives with Dimensity 6300 SoC and 6,000 mAh battery

As promised, vivo has unveiled the T4 Lite as the latest member of the T4 series, which includes the T4, T4x, and T4 Ultra. vivo T4 5G The vivo T4 Lite has the Dimensity 6300 SoC under the hood, paired with up to 8GB of RAM and 256GB storage, which is expandable up to 2TB

Samsung announces the date of Galaxy Unpacked event for its new foldables

Last week, leakster Evan Blass said that Samsung would host its Galaxy Unpacked event for the unveiling of new foldables on July 9. Well, Blass’ claim has turned out to be true, as Samsung has confirmed the July 9 date for the Galaxy Unpacked event. The event will be hosted in Brooklyn, New York, and

T-Satellite with Starlink is launching next month — what you need to know about T-Mobile’s satellite-to-mobile service

Starting next month, it should be easier than ever to stay connected on T-Mobile’s wireless network, as the carrier has just announced plans to launch its satellite-to-mobile service starting July 23. T-Satellite launches initially with support for text messaging, with plans to offer data connectivity over satellite in October. The T-Satellite service is the result

The Phinoi Dripper—A New Take on Vietnamese Coffee

A modern interpretation of Vietnam’s traditional phin filter, the Phinoi made its debut last month at World of Coffee Jakarta. Today, we’re giving it a go. BY VASILEIA FANARIOTISENIOR ONLINE CORRESPONDENT Photos courtesy of Vasileia Fanarioti Can a modern phin filter reinvent how we experience Vietnamese coffee? That’s the question posed by the Phinoi, a strikingly

No one expected T-Mobile to dare so much: competitors should take note

T-Mobile has established itself as one of the major players in the mobile phone market in the United States. Its network is one of the most extensive and reliable in the country, and this has attracted not only millions of users. It has also drawn other companies interested in offering telecommunications services over its infrastructure.

Samsung Galaxy Z Fold7 and Z Flip7 prices leak ahead of launch

The Samsung Galaxy Z Fold7 and the Z Flip7 are reportedly just around the corner, so retailers are getting ready for the market release and putting up some preliminary listings. However, in order to prevent leaks, Samsung has started using codenames for its devices. Listings from an Italian retailer Unfortunately

Casabrews CM5418 Espresso Maker review

Today’s best CASABREWS Espresso Machine CM5418 deals When it comes to coffee, I’m pretty picky – not just about flavor, but about what my machine is made from. After speaking to toxicologists and medical experts about plastic coatings and mystery metals, I’ve been on the lookout for the best non-toxic coffee makers made without BPA

Nothing Headphones (1) now leak on video too

Nothing will release its first-ever over-ear headphones alongside the upcoming Nothing Phone (3) – that’s happening on July 1 (Tuesday). The company has created a suitably kooky design, which leaked a few days ago. Now, an even bigger leak has hit the web. This video is based on unconfirmed info, but offers potential answers to

Check out these detailed renders of the Galaxy Watch8 series

We can now be almost entirely sure what the Galaxy Watch8 series will look like, thanks to this latest batch of press renders, courtesy of Evan Blass. The renders show the Galaxy Watch8 in Black, the Galaxy Watch8 Classic in White, and the Galaxy Watch8 Ultra 2 in Blue. The big thing this year is

0
Would love your thoughts, please comment.x
()
x