Why 401(k) Plans Finally Work
Besides offering target funds, some employers are also hiring financial advisors who help employees invest their assets. Both approaches are helping to boost returns. According to consultant Aon Hewitt, employees who use target funds or receive advice get higher investment returns than people who must make decisions on their own.
When target funds are combined with automatic enrollment, employees can enjoy a sound retirement strategy. In many respects the new 401(k) plans now resemble the old days when employees enjoyed the security of traditional pensions.
Make no mistake, even the best 401(k)s are not as good as typical pensions. If the stock market stagnates for years, today's savers could be disappointed at retirement time. But the new reforms have improved the odds that 401(k)s will provide solid retirement income.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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