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Old 06-14-2014, 03:57 AM
 
29,794 posts, read 34,889,516 times
Reputation: 11715

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They Just Re-Invested Your 401(k), for Your Own Damn Good - Bloomberg

Wow, sorta wow and still trying to put this in perspective. But more companies are independently changing their employees investment choices and putting them in ones the company considers more appropriate for them. The assumption is that people are making lousy choices on their own.

Quote:
For that reason, the hottest trend in 401(k) plans is making investing easier for employees. More plans automatically enroll workers in target-date funds or other professionally managed, diversified options. Plans may also automatically increase contribution rates each year. Employees can opt out, but few do
.

Quote:
On the assumption that many workers invest all wrong, some employers are overriding their workers’ existing selections. Unless employees object, companies are re-enrolling them in new funds, usually in target-date funds with risk profiles suited to their age.
Anyone familiar with? Thoughts? I wonder if fees are the same or if folks are just oblivious to the what is happening and don't realize they were changed.
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Old 06-14-2014, 04:38 AM
bUU
 
Location: Georgia
11,887 posts, read 8,670,935 times
Reputation: 8429
The automatic enrollment aspect comes from regulatory provision:
Quote:
A cash or deferred arrangement that satisfies the requirements of this paragraph (a)(2) is referred to as a qualified automatic contribution arrangement.
26 CFR 1.401(K)-3 (a)(2)

While folks can opt out, the trend is toward making automatic enrollment and automatic contribution increases the norm.

I suspect the rest of it relayed from a one-sided perspective, aimed at attracting the attention of the reader, and there is a more balanced reality not reflected in the editorial. I especially love how this important comment is buried toward the end of the editorial, in this poorly-worded sentence, "That's why the vast majority of companies that re-enroll only do so when they switching retirement plan providers." So basically, the editorial is saying that when the investment options that that employee's 401(k) has been invested in in the plan are replaced by other options, the plan sponsor maps the old funds into new funds, so that the money doesn't sit around as cash.
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Old 06-14-2014, 05:10 AM
 
Location: Central Massachusetts
4,800 posts, read 4,853,880 times
Reputation: 6379
Quote:
Originally Posted by TuborgP View Post
They Just Re-Invested Your 401(k), for Your Own Damn Good - Bloomberg

Wow, sorta wow and still trying to put this in perspective. But more companies are independently changing their employees investment choices and putting them in ones the company considers more appropriate for them. The assumption is that people are making lousy choices on their own.

.



Anyone familiar with? Thoughts? I wonder if fees are the same or if folks are just oblivious to the what is happening and don't realize they were changed.
I have been seeing more and more of the younger workers in FERS opting on those managed fund with target dates. Since I started early on in the system I never allowed that conversion of my funds and preferred to leave it in the funds I had already.

Quote:
Originally Posted by bUU View Post
The automatic enrollment aspect comes from regulatory provision:
26 CFR 1.401(K)-3 (a)(2)

While folks can opt out, the trend is toward making automatic enrollment and automatic contribution increases the norm.

I suspect the rest of it relayed from a one-sided perspective, aimed at attracting the attention of the reader, and there is a more balanced reality not reflected in the editorial. I especially love how this important comment is buried toward the end of the editorial, in this poorly-worded sentence, "That's why the vast majority of companies that re-enroll only do so when they switching retirement plan providers." So basically, the editorial is saying that when the investment options that that employee's 401(k) has been invested in in the plan are replaced by other options, the plan sponsor maps the old funds into new funds, so that the money doesn't sit around as cash.

Excellent catch there too. It is important that the transition go quickly because of tax issues of that conversion.

I do not disagree with the targeted date funds. So far in FERS I am seeing decent rates of return though because they are progressively more aggressive as the dates are further out. It makes sense and because I have been in for a while many of my coworkers come to me for some advice. I remind them I am not a financial wizard but do try to give them pros and cons of the options on the table.
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Old 06-14-2014, 06:31 AM
 
7,983 posts, read 11,671,461 times
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Well as one of those employees who did it all wrong and am now screwed I'm not sure I would complain. I think its nice for people who like paying attention to their 401k's and doing all the work to have their choice however.
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Old 06-14-2014, 01:08 PM
 
Location: Northern panhandle WV
3,007 posts, read 2,175,781 times
Reputation: 6696
my husband found this year that his company had changed plans and were doing thie automatic thing, we promptly changed it to the investments we preferred.
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Old 06-14-2014, 01:14 PM
 
Location: SC
8,793 posts, read 5,668,064 times
Reputation: 12805
There'd better be a pretty damn big check box on the form that say "Allow us to override your decisions."
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Old 06-14-2014, 01:36 PM
 
Location: Great State of Texas
86,093 posts, read 72,556,082 times
Reputation: 27566
They started doing that a number of years ago.
Face it..most people are lazy.."I'll do it tomorrow".

So they changed 401K's to be automatic enrollment unless you OPT out.
Now they do automatic investment unless you go in there and choose yourself.

If you haven't noticed there are a lot of things that you not have to opt out of rather than opt into.
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Old 06-14-2014, 02:36 PM
 
71,763 posts, read 71,853,273 times
Reputation: 49311
When it comes to financial planning anything that can keep our masses of financially ignorant folks from their own devices will likely be a winner.

I an no fan of target date funds but they are still much better than most folks would do on their own.
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Old 06-16-2014, 09:56 AM
 
Location: SoCal
6,075 posts, read 9,540,537 times
Reputation: 5832
Our financial guy didn't like any of the investment options in my 401K plan. He said they were great for younger workers, but lousy for someone looking at retiring soon. So we did an "in-service rollover" (which anyone can do after age 59) and he's investing the money in more appropriate ways.
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Old 06-16-2014, 11:14 AM
 
Location: Iowa
190 posts, read 154,166 times
Reputation: 385
I was stuck into a target fund. For me, it is a less than optimal choice. I want tax efficient investments and put the right investment in the an optimal place. Foreign? Hmmm, lets tax it overseas but not allow those taxes to be written off. With Soc Security and a small pension, I have an adequate income stream for retirement. I still am pushed to a overly cautious investment targeted fund.
A Bogleheads wiki has some good basic info. I picked up some nice tips on some of the finer points of asset location from this and running my own numbers on tax code.
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