Will employees and employers win… or lose? 

At the time employers began rolling out 401(k) savings plans for their employees, the message was clear: ‘Take control of your own retirement destiny, invest your money as you see fit, and you have alternatives in choosing from among many different options.’

Now, more than a year after the worst bear market since the Depression, 401(k) accounts are close to being where they were at the peak of the market in 2007 - thanks in large part to the contributions of employees. This being said, both the bear market and recession have forced a realization of potential shortcomings of the 401(k). Depending on the overall stock market, even a conservative portfolio may have been slashed in half, or worse.

Scurrying for solutions, employers are now tinkering with 401(k) plans to prevent employees from making poor investment decisions, and encouraging them to start saving

‘You can take charge of your own destiny’, employers are saying, ‘but we'd like to save you from yourself in this process.’ While results are far from certain, early indications already reflect that there is progress being made.

We believe that the most effective planning on the part of employers for the life cycle funds, is to list the fund's full allocation at maturity. An alternative is to develop labels, including an aggressive/moderate/conservative label in its name to make its function and possibilities clearer to employees.

By developing and implementing a disclosure of any real or potential employees will be better equipped to take control of their financial destiny and make more informed financial decisions.