With Employee Fiduciary, you have two basic options for professional investment advice - Target Date Funds or a financial advisor. To choose the best option for you plan, you should understand their pros and cons
Target Date Funds
There is no easier way for 401(k) participants to access professional investment advice. To do so, they simply need to invest 100% of their 401(k) account in the Target Date Fund (TDF) that best matches their estimated retirement date.
- There is no simpler way for 401(k) participants to access professional investment advice.
- Set it and forget it. TDFs offer automatic rebalancing. Further, their asset allocation will gradually shift to fewer stocks and more bonds (i.e., become more conservative) the closer the participant gets to retirement.
- Low cost. The investment expense of a Vanguard Target Date Index Fund (TDIF) can be less than 15 bps (0.15% of assets) annually.
- TDFs can qualify as a Qualified Default Investment Alternative (QDIA) when participant disclosure requirements are met.
- Advice can’t be personalized to meet individual investment goals.
- TDFs comprised of actively-managed investments can get expensive.
- TDFs offer no participant engagement or coaching.
This advice can be customized or delivered in-person – factors than can motivate more savings by plan participants.
- Advice can be personalized to meet individual investment goals.
- In-person advice can be helpful in motivating 401(k) participants to keep their retirement savings on track. Like a personal fitness trainer.
- Non-investment services can make 401(k) plan sponsorship less stressful for business owners.
- Can be a lot more expensive than target data funds. 401(k) participants should receive commensurate value in return.