5 Biggest 401(k) Mistakes Consumer Report
If it isn’t broke, then don’t fix it. In the new age of the 401(k), old adage need not apply. Treating your company’s 401(k) like a set it and forget it slow cooker is a thing of the past. Unlike other employee benefits, when managing your company’s retirement plan you are overseeing money that belongs to the employees. According to ERISA (Employee Retirement Income Security Act of 1974), as the plan sponsor, you have a responsibility and obligation to handle these funds with care. With ever-changing retirement plan regulations, it can be difficult and stressful to meet your required responsibilities. This consumer guide has been created to better prepare you to fulfill those responsibilities. Below are the 5 biggest 401(k) mistakes and ways to avoid them.
The 5 Mistakes
Mistake #1: Not Knowing if Your Advisor is a Fiduciary
Not all advisors are fiduciaries. A Fiduciary must put their client’s interest before their own interest. Some financial professionals who work with retirement plans are brokers, not advisors. Often brokers only work on a commission basis and do not act as a Fiduciary. Business owners often default to hiring their personal financial advisor to handle their 401k plan, not understanding if their personal advisor is a broker or a Fiduciary Advisor as well. Just because their golf buddy does a serviceable job handling the owner’s personal investments, does not mean they understand ERISA or they are a cultural fit to advise and guide the company’s employees. Hiring an advisor for your company is a Fiduciary responsibility. Hiring an advisor who is not a Fiduciary can put additional risk on the company.
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