Friday, May 26, 2006

401(k) Asset Allocation

Dealing with suboptimal asset allocations in participant directed plans is an important issue, second only to getting participants to increase their contribution rates. The traditional industry solution to this has been participant education. However, the effectiveness of education based on empirical results has been limited. A product solution, target retirement funds, seems encouraging and is becoming very popular. Julie Agnew at The Center for Retirement Research at Boston College studied two other approaches to this issue; “On line advice” and managed account services.

Preliminary findings suggest managed accounts have more universal appeal across demographics , gender, employment status and salary while on line advice seemed to appeal more to full time higher salaried employees. This research might be helpful in matching your plan population to the most effective advice model.


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