Financial advisers say employers have made a lot of progress on lowering fees in recent years, though some say they still find odd plan design quirks that hurt savers.
One client saves in a 401(k) that only matches funds invested on a pre-tax elective deferral basis, meaning employees saving in a Roth 401(k) miss out on the company match, said John Gugle, an adviser with Alpha Financial Advisors in Charlotte, North Carolina. Others fail to get the full company match because they accelerate their contributions early in the year.
"We advocate for our clients when we feel that their plan is sub-standard," he said in an email, though he noted that investment fees have been declining steadily and investment choices in plans have generally improved in recent years.
Other advisers say many plans still have a long way to go to be considered investor-friendly.
"Many participants in smaller plans are still stuck with high cost, commission-based products," Sean Condon, an adviser with Windgate Wealth Management in Chicago, said in an email.
Spurred by federal legislation aiming to cut expenses, that is changing, but some fear the rush to low-cost index mutual funds will subject older participants to more market volatility when they have little time to recover. Though studies have consistently shown index funds outperform actively managed funds over the long term, some advisers say near-retirees could pay the price for blind adherence to index funds.
"While many higher cost, actively managed funds have under-performed index funds during this bull market, we are seeing a return to volatility," said David Mullins, a financial adviser in Richlands, Virginia. "Actively managed funds typically earn their keep protecting on the down side."
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