Bill Ryan, Head of Defined Contribution Solutions at NEPC, sat down with The Wall Street Journal to discuss why bespoke retirement plans, such as managed accounts, are not always worth the additional cost. View the article on The Wall Street Journal’s site here.
What’s the best option for your 401(k), one-size-fits-all or a custom fit?
Most of us go with the one-size-fits-all option, putting our retirement savings in target-date funds built to maximize returns based on our timelines for retirement. A growing number of people, however, are choosing the custom fit in the form of managed accounts, which seek to tailor investment portfolios and advice to their situations.
As with clothing, the custom option will cost you. What investors have to determine is whether a managed account merits the price.
. . .
Only about 15% of people in managed accounts typically provide the information needed to personalize their portfolios, said Bill Ryan, head of defined contribution solutions at NEPC. Without data on factors including risk tolerance and outside account balances, people mightmiss out on the potential for extra value that they are paying for, he added.
A small fraction of employers auto-enroll workers in managed accounts, but most plans that offer them leave it up to savers to choose to sign up. Most 401(k) plans offer only one managed account service, making it impossible for employees to comparison shop.
Click here to continue reading the full Wall Street Journal article.