Educate Employees on 401(k) Ups and Downs
It's no surprise that the market has not performed as well as it could have over the last few months. However, for the first time, many younger employees are experiencing the fact that when the market is down, growth also is down in their 401(k) or related plans.
It's up to employers to educate their staffs, and now is a good time to do so.
A person's first thought is to sell and get out of the market, a not-so-very-wise move according to the experts.
"All that does is lock in losses and prevent the investor from reaping rewards when the market grows again," says Martha Priddy Patterson, national director of employee benefits policy at Deloitte & Touche. "Markets decline, but they also rise again."
Instead, Patterson suggests that employees receive basic investment education, including historical review of past market performance.
Another tactic is to impress that a company savings plan really is a retirement plan designed for long-term growth, not just for the short-term.
Employers, though, can help by limiting the choices for participation, says Patterson. For example, she says that any more than 12 choices on investments confuses the employee. Instead, she advises that employers should ensure the choices given represent a range of types of investments.