As we get closer to 2026 here’s a few examples of what you should never ever do in your 401k.
And we mention this because many plans give you a window to make changes/adjustments at this time of the year.
So, if you participate in a 401k, chances are you’ve been confused with the choices offered.
Here’s a few reasons for the confusion.
First, the options offered to you are written in terrible legalese that requires you to have someone explain it to you.
And when you call-in to ask questions, the rep you talk with is often more confusing than the website.
They’ll tell you to read all about the funds by going to a certain link.
(Seriously, who has the time to read about all the mutual funds offered anyway?)
Second, the lawyers design it this way to get you to default to the choices called “Strategic Target Programs for 2044.” (or whatever year you plan on retiring).
These are the worst things in the world to buy.
Never Ever
Caution! Stay away, NEVER, EVER buy them.
These are packaged programs that ALLEGEDLY target specific dates for maturity.
And they’re supposed to include bonds that mature on or near the date of your retirement.
Sounds great, doesn’t it? All you have to do is simply “set it and forget it.”
It even seems like you get a guaranteed rate of return.
But nothing could be further from the truth.
You see, the fund managers of these “Strategic Target Programs” often have a lot of garbage bonds stuffed into their portfolios.
Many of these bonds are “leftovers” that the fund manager can’t get rid of.
So, they’re packaged with some stock funds and labeled as “conservative” investments. *
(* Remember the 2008 meltdown caused by the alleged “AAA” guaranteed mortgage bonds?)
Adding insult to injury there is a fee that’s “wrapped around” the package in addition to the fees charged on every mutual fund.
They may boast about having the lowest fees in the industry and/or they have “no load” funds.
But ask yourself a question. Who do you know (especially among Wall Street Bankers) that works for free?
The published historical returns on these packages are skewed based on a complicated formula.
It’s not based on one measuring stick but numerous benchmarks.
And, unfortunately, these packages rarely, if ever, outperform the markets.
Even worse, they lose more when we have down markets.
So, what do you do?
Every month we write a Short and Sweet Tips column that addresses many of these issues and more.
Check it out (HERE).
Share this with a friend…especially if they have a 401k that confuses them. They’ll thank YOU later.
And tell them:
We’re Not Just About Finance
But we use finance to give you hope.
“And you shall know the truth, and the truth shall make you free.”
~John 8:32~
