If you need a reminder that 401(k) participants need help in managing their accounts, then consider the recent Investing Sentiment Survey done by MFS Investment Management:
- 34% of investors feel overwhelmed by all the investment choices available to them.
- 25% put off decisions out of fear of making the wrong choice.
- 51% of Gen Y investors agree that investment products are overly complex, more than the 40% average for the survey and older age groups (Gen X, 39%; Boomers, 40%).
True that the MFS Survey covered only individual investors, but experience suggests that there would be no appreciable difference among 401(k) participants. Those sentiments are what’s driving some 401(k) providers to offer a wider range of investment packages.
Notice I said “packages” rather than “funds” since the offerings attempt to address the needs, concerns, investment objectives, and the sophistication level of the participants such as:
- Asset allocation tools
- Risk-based funds, i.e., asset allocation funds
- Target date funds, both managed and indexed
- Individual investment advice
By themselves, these packages are only a partial solution. The necessary ingredient, of course, continues to be an effective and ongoing investment education program.