Before I got into finance 18 years ago, I started my career in advertising and I’ll never forget my first 401k investment meeting.
I was at my first job; a co-worker popped his head into my cubicle and asked if I was going to the 401k meeting. What 401k meeting? What is a 401k? So I went. A guy in a $2000 three-piece suit stood in front of about 100 of us and explained after-tax saving, pre-tax saving, asset allocation and tossed in a few indecipherable charts and some very colorful diagrams. As I surveyed the room, 80% of the folks were squinting and nodding – but the kind of nodding where you know they have no clue what he was saying. Another 10% were paying zero attention. And the final 10% seemed to be tracking quite well (I might add they were all from the finance department). Then came the question and answer session. I had a thousand questions…but there was no way I was going to raise my hand. I didn’t want to look like a fool and ask a stupid question about 401k investment advice. I imagine my co-workers felt the same.
I left the meeting with a binder, a koozie with a financial firm’s logo on it, and a pile of questions.
With curiosity piqued, I went back to my desk, logged on and attempted to set up my 401k. As I read through the options, I had a flash-back to French 101 in college. This was a mysterious foreign language to me. So I called the HR department. They told me it was up to me to pick the funds and make my own decisions or I could call the 800 number for the 401k custodian. So I called the 800 number. As it turned out, they would only give me suggestions, not advice. So I waved the white flag of surrender. I couldn’t figure out what funds to pick. I never got my 401k set up. Never got investment advice. So I lost out – big time. Not just on the company-match, but on years of compounding return.
The predominant theory of the 401k industry is that participants simply need more education to master the subject matter and make smart decisions.
However, Dennis Ackley, a retirement education consultant in San Diego says, “Today, 401k education is the largest failure ever of adult education. If the instructional concepts do not resonate with employees – and if they are not becoming personally motivated to learn and to save substantial amounts to reach their personally meaningful goals – then after three decades of trying, it’s time to stop using content experts to teach the basics.”
In other words, the current industry approach is broken. A 30-minute annual workshop isn’t going to close the gap or teach you how to manage your 401k. The do-it-yourselfer or wing-it-yourselfer model is dead. 401k investment advice is badly needed by thousands of people, so retirement doesn’t seem so impossible.
In its place has arisen the do-it-for-me model. And blooom is proud to be on the forefront of this wave. If you are looking for 401k investment advice and help, check out our simple.blooom.com site with videos and other blog articles. Or link up your 401k to blooom like you would Mint and try our online 5 min analysis.