Let's say you weren't so happy with the investment choices offered through your 401(k) retirement plan. What could you do to change them?
If you're a government worker, and you participate in the government's version of a 401(k) plan, known as the Thrift Savings Plan, you can appeal to the fine men and women elected to Congress.
About 200 members of the House of Representatives co-sponsored a bill that would have added a real estate investment trust, or REIT, to the Thrift Savings Plan. That prompted the Federal Retirement Thrift Investment Board to order a private study weighing the merits of adding a REIT or other investment options to the plan.
The consultant nixed the idea, concluding that investors already had exposure to REITs through available funds. It also had some concerns about the plan's ability to absorb large cash flows. The study also found more disadvantages than advantages in adding other investment options, which included growth and value stock funds, emerging markets stocks, non-U.S. bonds, commodities, and Treasury inflation-protection securities (or TIPS).
This probably isn't the end of the discussion, because government workers who participate in the Thrift Savings Plan have 535 elected officials advocating on behalf of their retirement. As plan participants, members of Congress have a big stake in the system.
Unlike this plan, many 401(k) plans have been changing lately. A recent Vanguard study found that the number of options available in the average savings plan rose by 18.6 last year. Your plan may have added new investment options. Targeted retirement funds, which adjust their investment allocations as a worker ages and gets closer to retirement, have been a popular addition.
If you've looked over your plan options and you're still not happy, you might try a little lobbying yourself. Not everyone needs the help of an elected official to exert a little influence on their retirement plan administrators.
Your plan should, at minimum, include a passively managed equity index fund that tracks the performance of the S&P 500. Those funds are typically low-cost, and they give investors a stake in a vast pool of the economy's biggest businesses. Their top holdings include energy and consumer goods giants like ExxonMobil
The Motley Fool feels so strongly about this that we've drafted a letter you can send to your benefits department to request that it add such a fund to your investment choices. You can find the letter, and a wealth of additional advice, in the 401(k) center.
If you want more from your 401(k) than just an index fund or the other investments available -- perhaps the addition of a REIT or an emerging markets fund -- don't assume you're simply at the mercy of the folks on the human resources floor.
Talk to your benefits department about changes you'd like to see in the plan. Many companies are adding funds, and they may welcome your input if they feel that their choices will be popular with employees. Back up your argument with some information. Telling the nice folks in charge of your plan that their choices could have been picked by a monkey and that you'd rather invest your money under your mattress may not be the best way to influence their decision-making.
Instead, for example, present the case that REITs can help employees diversify their portfolios because their returns aren't closely correlated with the stock market. Then let them know about the options available, like the Vanguard REIT Index Fund
Talk to your co-workers and find out whether others might be interested in changes, too. A group of voices may be heard more easily than one. A well-drafted memo from a group of employees might draw the benefits administrators' attention to ideas they wouldn't have otherwise considered. If you belong to a union, it might be that much easier to enlist help for your cause.
And, keep at it. Have a little patience when pestering the benefits department. Give it time to review your ideas and investigate alternatives. Don't give up too easily, but don't expect instant results. After all, workers there are as busy as everyone else in the company.
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