All those 401(k) participants who find they lack the time, expertise or inclination to monitor their own accounts -- and that includes most of us -- have an alternative: managed accounts.
Only one out of ten participants wants to go it alone and manage his or her own investments without any help, says Don Salama of New York Life Investment Management Retirement Plan Services. If you're one of the other nine, it's likely that you'll soon be able to plug all your pertinent retirement information into a sophisticated computer program that cranks out a strategy for your 401(k) plan. The program will figure out how much you need to save, and will automatically allocate your money among the plan's investment options.
"We use the same tools that money managers use to run big pension funds," says Jeff Maggioncalda, president of Financial Engines, the investment advisory firm that collaborates with Vanguard and other 401(k) providers. In effect, participants get access to professional money management at a much lower cost -- with fees typically ranging from 0.1% to 0.8% of assets -- and with no minimum investment. Your funds are rebalanced automatically, and they are invested more conservatively as you near retirement.
Some advisers offer services that are even more specialized. New York Life automatically increases your 401(k) contribution when you get a pay raise. And if your employer decides that company stock should be limited to, say, 15% or 20% of your account, the program will gradually sell off shares if your holdings exceed the cap.
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