There is change coming to 401ks that can make a huge impact on your retirement nest egg thanks to a ruling from the supreme court.
Currently, many company 401k plans and their investments are quite expensive compared to many new mutual fund and ETF options. While this has been going on for years the tide is finally turning to favor the employee.
There have been several lawsuits that have shown that employees will push back against companies to offer better investment options than previous alternatives with only a few limited mutual funds with high fees.
These lawsuits generally are about high 401k fees and conflicts of interest. The employees are pushing plan sponsors to do what is in the best interest of the employee.
Monday the supreme court ruled unanimously in favor of participants in employee retirement plans who object to companies’ investment decisions that eat into retirement savings.
What does this mean for employees? It means that those who oversee 401k retirement plans have an ongoing duty to ensure investments are prudent. What this hopefully means is that all things considered going forward you should have a little more faith in your 401k plans and their associated costs. It still doesn’t mean that costs are going to be way lower but that you should have more decent options and more plan sponsors should be focusing on the best interest of the employee.
One thing to note for those who are self-employed is that you don’t have to worry about many of the fees and issues associated with investing in the stock market through your 401k. You can invest with a self-directed 401k account. A self-directed 401k gives you all the same benefits as a regular 401k except that it gives you the ability to invest in non traditional investments like real estate, gold and private placements.
While you may like the idea of having your whole nest egg reliant on the stock market it may not be your best options. One smart way to invest your retirement savings is with diversification. One way to do that is to diversify outside of the stock markets into alternative investments.
We are glad to hear that the supreme court is siding with employees about high costs/fees. 401k plans and options will be getting better for employees but while the change is needed it won’t be changing things drasticaly anytime soon. Remember you have other options when investing with a 401k. Check out a self-directed 401k for more information on how you can invest more diversely.
Author: Nick Barker