4 Ways Your Employees Aren’t Making the Most Out of Their 401(k) Investments

August 25, 2021

Using a 401(k) plan is a great way for your employees (or plan members) to invest in their retirement. But did you know that many members aren’t taking full advantage of investment opportunities? That means they’re missing out come retirement time.

Here are 4 ways your 401(k) plan participants aren’t making the most out of their retirement plan:

1. Lack of education

Many employees, depending on their experience with investments, may not have the proper education to understand how to use their 401(k) wisely.

Unwise investments can begin right from the start as participants sign up for their plans.

Spend the time to educate your employees right from the start: provide documentation and/or a meeting for all employees on an annual basis. That way, you (or your financial representative) can answer any questions and help as employees need to alter their investments on an annual basis.

2. Ignoring investments

Speaking of revisiting investments, it’s critical to rebalance investments every year. Unfortunately, 401(k)s aren’t a “set it and forget it” investment, which is how some of your employees may see it.

Risk, the market, and priorities change constantly, so it’s important to remind your participants to revisit their plans regularly (if not, at least annually). Work this into your annual meeting/documentation, or consider offering employees an annual quiz to assess how investments should be changed or moved based on needs and priorities.

3. Listening to friends or “experts”

As you well know, there are plenty of financial “experts” out there. Coupled with friends who like to invest and your employees have more than enough opinions driving how they control their 401(k) plans.

Again, education is the best medicine. Be proactive about providing reliable information regarding their plans so that they can make the best-informed decisions about their investments.

4. Getting tunnel vision with investments

When it comes to investing, everyone’s a little different. Some of your plan participants will feel very comfortable doing their due diligence and investing in areas that make sense.

Others, however, may get tunnel vision.

They may: chase investments that they don’t end up making money on, invest in a fund that is too risky this close to retirement, investing in funds that were profitable in the past, refusing to sell as a fund’s value drops, and so on.

While it’s great when your employees feel emotionally invested in their 401(k) plans, it’s important to continue providing education and expertise to help them make more informed decisions.

Help your employees make smarter decisions with their 401(k) plans today. Offer the education necessary and help needed to ensure your plan participants have a lucrative retirement plan.

Ready to learn about supporting employees with 401(k) plans? Contact or partner get-benefits today to learn more.

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4 Ways Your Employees Aren’t Making the Most Out of Their 401(k) Investments

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