Newsweek Cover: '5 Ways to Fix the 401(k)'
Newsweek Offers Five Ways to Save the Dwindling Retirement Accounts of
Millions of Americans; 'Change is Essential Now That
401(k)s Have Become the New Safety Net' Writes Jane Bryant Quinn
NEW YORK, Aug. 11 /PRNewswire/ -- During the bubble years, investing looked like a piece of cake. Now savers are billions of dollars behind with no road map for catching up. Change is essential, now that 401(k)s have become the new safety net, writes Contributing Editor Jane Bryant Quinn in the August 19 Newsweek cover story, "5 Ways to Fix the 401(k)" (on newsstands Monday, August 12). "We need to be protected from our own mistakes," Quinn writes. "Back in 1974, Congress rescued workers who were losing their pensions in ill-run or bankrupt plans. That cycle has come around again." Her remedies: (Photo: http://www.newscom.com/cgi-bin/prnh/20020811/NYSU003 ) Limit the Choice of Funds: Most people spread their money over three or four funds, no matter how many different options they have. But the greater the choice, the greater the risk that you'll pick a poor investment mix. Quinn suggests two models for a "perfect" 401 (k). One is the Thrift Savings Plan, run for federal workers. "This kind of plain-vanilla saves you from obsessing over six different growth funds. Instead, you focus on the decision that matters most to long-term success -- namely, how much of your money to allocate to various types of assets." Don't Bury Workers in Company Stock: The more you own of a single stock, the more potential trouble you're in, especially if your job is tied up with that company, too. Quinn writes that she wouldn't let anyone hold more than 10 percent of his or her 401 (k) money in company stock. That's the legal limit for traditional pension plans, to keep lifetime payouts safe. Put the Squeeze on Easy 401(k) Loans: The average borrowing rate today has reached 18 percent of all participants -- but that climbs to 23 percent among those with low or moderate incomes. "That partly defeats the purpose of having a savings plan," Quinn writes. Provide Independent Investment Advice: "By advice, I mean real advice. A place, a phone number, a person, a Web site where savers can ask the essential question "What should I do?" she writes. Good advice might even be worth companies paying for it and shaving off some of the company match. Alternatively, plans might find ways of cutting costs, in order to make room for personal help. Push Everyone Into the Pool: While it's no fun losing money in your 401(k), the far greater problem is that people aren't saving enough to start with, Quinn writes. Companies could help by signing up workers for 401(k)s automatically. The employee could always opt out, but thanks to inertia, most would stay. A handful of companies are already providing automatic accounts. (Read Newsweek's news releases at http://www.Newsweek.MSNBC.com. Click "Pressroom.") MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X57355578
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