Should 401k Plans Offer Only Index Funds?

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By Robert C. Lawton, President, Lawton Retirement Plan Consultants, LLC

A number of retirement plan experts believe that 401k plan participants should only be allowed to invest in index funds. They say the additional cost that participants pay for actively managed mutual funds is not justified by better performance. Some 401k plan sponsors have agreed, offering only index funds in their fund lineups. Is that a good idea?

Arguments For Using Only Index Funds

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401k Investment Menu Best Practices

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PSI Newsletter and Website Header 10.2.15

By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

How does your 401k investment menu compare to the marketplace? Do you have too many investment options or too few? Are you taking advantage of all the safe harbor options available to you? In this low return, low-interest rate environment there is a new set of best practices to use for 401k investment menu construction that includes: [Read more…]

Should Your 401k Plan Offer ESG Investment Options?

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PSI Newsletter and Website Header 10.2.15By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

At the very least, your Investment Committee should have a discussion about the topic. Here’s why. [Read more…]

Help Your 401k Participants Manage Risk

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Ameriprise recently conducted a survey of investors aged 25 to 70 with regard to their views on risk. The survey sample can be considered a good representation of almost any group of investors, including those in your 401k plan. Using the survey results, Ameriprise classified investors into four categories. Outlined below are the categories along with my thoughts on what you can do as a plan sponsor to help these 401k plan participants become better investors in your 401k plan. First, it might help to better understand risk. [Read more…]

Why You Shouldn’t Use Custom TDFs In Your 401k

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Recently, it has become popular for large corporations to adopt customized target date fund approaches for their 401k plans. Before jumping into why this approach has never made much sense to me, it might be good to start out with a couple definitions.

What are Target Date Funds (TDFs)?

Many mutual fund families have created an integrated series of investment funds with dates in their names. The dates approximate the time period that a participant will turn age 65 and retire. These professionally managed investment funds vary their bond/stock allocation percentages as time goes by so that as a participant gets closer to age 65 his/her allocation becomes more conservative. Target date funds are generally considered to be the most appropriate investment for the vast majority of your 401k plan participants.

What are custom TDFs?

Custom TDFs use a unique set of underlying investments and/or alter the bond/stock percentages significantly for the different funds in the series. These different bond/stock allocations are based upon demographic assumptions unique to the client. The intent is to create a non-standard glide path for the target date series.

Why I don’t like custom TDFs

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Why TDFs Are The Best Professionally Managed 401k Investment Option

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PSI Newsletter and Website Header 10.2.15

By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

There has been quite a bit written recently, most negative, about target date funds (TDFs).  It is hard for me to understand why since TDFs provide 401k plan participants with: [Read more…]

Four Reasons The Feds Want Company Stock Out Of 401k Plans

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Recently the U.S. Supreme Court announced that they will be reviewing a case – Fifth Third Bancorp v. Duddenhoeffer – about the appropriateness of offering company stock in a 401k plan. Why would the Federal Government be concerned about company stock in 401k plans? Following are some potential reasons: [Read more…]

Are There Alternatives To Using Mutual Funds In 401k Plans?

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

Mutual funds are the most frequently offered investment option in 401k plans. Are there any viable mutual fund alternatives? Probably not. Here’s a rundown on the most popular mutual fund alternatives which plan sponsors sometimes consider: [Read more…]

Should 401k Plans Only Offer Index Funds?

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

You may have heard that many experts believe 401k plan participants should be confined to investing in index fund only line-ups. They say that the additional cost that participants pay for actively managed mutual funds is not justified by better performance. A number of employer plan sponsors have agreed, concluding that offering an index fund only line-up is the way to go.  [Read more…]

What’s Right About Target Date Funds? A Lot!

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PSI Newsletter and Website Header 10.2.15
By Robert C. Lawton, AIF, CRPS, President, Lawton Retirement Plan Consultants, LLC

There has been quite a bit written recently, mostly negative, about target date funds.  It is hard to understand why since they provide 401k plan participants with: [Read more…]