Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
I have a low regard for the 401(k) system. It’s supposed to provide a tax-deferred way for plan participants to save for retirement. Instead, it is a trough from which advisers, brokerage firms, and mutual fund families feed, depleting returns by billions of dollars of obscene fees every year.
And they’re the ones who are supposed to be helping you maximize your 401(k) returns.
The basic problem is the interest of these vendors is in direct conflict with the interest of plan participants. The vendors want to maximize profits. They achieve this goal by populating the plan with expensive, actively managed mutual funds (where the fund manager attempts to beat a designated benchmark), preferably its own proprietary funds.
As a plan participant, you want to maximize your returns. It’s in your best interest for the plan investment options to include only low-cost stock and bond index funds, preferably in pre-allocated portfolios at different risk levels. Low costs correlate with superior returns. But they also mean lower profits for advisers, brokers, and mutual fund families.
Plan participants, many of whom are not sophisticated investors, are left with the daunting task of putting together risk-adjusted portfolios suitable for them from a wide array of poor choices. This is not easy or fair.
Here are some guidelines that will help you make better selections from your 401(k) options.
Look for index funds. Check the fund options and see if there are any index funds available. Typically, these funds have “index” as part of the fund name. The goal is to find an index fund that uses the following benchmarks:
The ideal plan would have index funds that use each of these benchmarks as an index. If you are among the few fortunate employees to have such a plan, take these steps:
Look for target-date funds. Most plans now include target-date funds. These funds permit you to buy just one fund, which automatically becomes more conservative over time. All you do is pick the fund with the year in its name closest to your projected retirement date. These funds can be great choices for investors, but they’re not right for everyone.
Check to see if the underlying funds are index funds. Vanguard’s retirement funds consist solely of its low-cost index funds, making them a particularly good choice.
Even if the underlying funds are not index funds, picking them might still be a better choice than trying to put together a portfolio from the many funds available to you. Be sure to check the asset allocation of the target-date fund and see what percent of the fund is allocated to stocks versus bonds. Make sure the asset allocation is right for you.
Focus on cost. If you are stuck with a selection of mostly actively managed funds, focus on the cost of the funds. The cost of a fund is listed as its “expense ratio.” If a number of funds indicate they are attempting to beat the same benchmark, pick the fund with the lowest expense ratio. Try to find funds that indicate they use the benchmarks noted above.
Use a conversion chart. In The Smartest 401(k) Book You’ll Ever Read, I provide a list of common domestic stock, international stock, and bond funds and list the expense ratios of these funds. You may find this list helpful in making the best of a bad situation.
Dan Solin is a Senior Vice-President of Index Funds Advisors. He is the author of the New York Times best sellers The Smartest Investment Book You’ll Ever Read, The Smartest 401(k) Book You’ll Ever Read, and The Smartest Retirement Book You’ll Ever Read. His latest book is Timeless Investment Advice.
Watch Dan on YouTube.
Asset Allocation: Maximize Your Returns and Minimize Your Risk
Avoid Exchange-Traded Funds (ETFs) as Part of Your Investment Strategy
How to Maximize Your Investment Returns with Your Cash Reserves
Investing As A Couple Can Lead to Marriage Stress
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.