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401K Savings Plans May Be A Disaster Waiting to Happen

Are you aware of how 401k plans came into existence? Most people are not. The fact is they came about by accident when a benefits consultant read a sentence in the government’s Revenue Act of 1978 regarding deferred compensation. This astute consultant took it upon himself to inquire whether the statement would apply to all compensation. When the answer was in the affirmative, the 401k Retirement Savings Plan was born.

In 1985, there were a mere 30,000 401k plans. By 2013 that number had soared to 638,000 plans with 89 million plan participants. The 401k Plan is without question the most popular vehicle for retirement savings.

Recently a wave of 401k related lawsuits have been filed against companies for a variety of issues, which may mean the 401k may not be the best place for your money. These suits have made their way all the way to the Supreme Court.

Mismanagement, Excessive Fees

The Supreme Court is looking into several issues. Most of the suits allege mismanagement and outrageously high fees.  The question being raised is whether the company offering the 401k Plan is responsible for monitoring the suitability of investment options and whether they are responsible for remaining proactive in monitoring the plan instead of stopping their responsibility after the funds have been in place for more than six years.

Groups such as the AARP, The Pension Rights Center and the U.S. Solicitor General agree that since the 401k plan is essential to a saver’s retirement security, the plan sponsor should be held responsible for monitoring the investment options and making sure the fees are not excessive.

Be Responsible for Your Retirement

Do you think it is the responsibility of your company or the government to plan for your retirement? Ultimately, each individual is responsible for making sure they are going to be financially ready for retirement. 401k Plans have been all the rage and they have been entered into with trust that the company has in mind the best interest of their employees. Wrong. No one is going to take care of you.

Whether you have a 401k or not, look into it with a financial advisor to make sure the plan is best for your needs and is growing as well as possible. If the plan is not being utilized to its full potential or as it should be, look into other options.

Take it upon yourself to start exploring and learn about alternative solutions that may be even better options for your retirement savings. Perhaps it is not in your best interest to have all your money in one place. Don’t wait for the Supreme Court’s ruling. Your company should also be taking action to look into their plans before the rulings come down. Companies could be held responsible for plans that are not up to snuff. In fact, your company may be moving away from mutual funds and looking at lower cost ways of investing.

Don’t wait. You will be retiring some day. Save as much as you possibly can in the most secure and well-planned way. You may notice your company plan following your lead.


Jaime Westenbarger


Forest Hills Financial Inc.






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Guest Wednesday, 20 March 2019