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Why retirement savers love 401(k)s

Before the invasion of the target date funds, most 401(k) plan investors were encouraged to leave their assets in funds that generally contained 100 percent stocks.

By Christopher Carosa | Updated on February 01, 2016

Before the invasion of the target date funds, most 401(k) plan investors were encouraged to leave their assets in funds that generally contained 100 percent stocks. Despite this, far too many employees opted for the “safety” of stable value funds. While the lack of volatility does indeed sound safe, it is anything but. For that reason, Congress passed the Pension Protection Act in 2006, which was, in part, meant to encourage retirement savers to move away from the “safety” of fixed income or stable value options into what many professionals acknowledged as more appropriate investments for long-term investors. Namely, equities.

The significance of these “more appropriate” investors is rarely discussed. Some simply assume the long-term superiority of equities. Others view them as a single arrow in the quiver of asset classes, neither better nor worse than any other arrow. The numbers, however, present a much less forgiving reality.

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Christopher Carosa

Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).

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