Check Your 401(k) Fees: Invest In Index Mutual Funds

A few years ago, new regulations mandated that 401(k) retirement plan administrators change quarterly statements to include more information about expenses about each fund in which the employee is invested. This was a good move.

I have mixed feelings about  401(k) plans. Today's world of employment is different than that from a generation ago. For those in the middle class, having a career meant, for many, sticking with the same company for a lifetime. Even after retirement, that company would take care of its employees with pensions and health benefits. With a growing middle class and some difficult periods of economic uncertainty, companies were unable to meet their pension obligations.

Wall Street stepped in. The financial industry pushed the idea of personal responsibility for retirement - it's difficult to argue against that concept. While the industry introduced products to help individuals invest for their retirement, the government enacted legislation that created tax incentives for those who were able to put aside some of their income for later.

Today, many companies automatically enroll new employees in 401(k) plans. This can be described as an advantage, encouraging younger employees to create a more secure retirement without much effort. The first steps - deciding how much to set aside for retirement and choosing the investments - are often the hardest, and they stop many people from enrolling in retirement  savings plans as early as they should. Sometimes the stopping point is just the idea that someone - particularly young employees - aren't earning enough to set aside anything for retirement. Automatic enrollment solves these problems and moves employees forward with their retirement savings quicker than any other options.

The same automatic enrollment approach to 401(k) is a great benefit to investment companies - particularly, the managers of mutual funds, the companies they work for, and the companies that administer plans (third parties standing between investment companies and employers offering the 401(k) plans). The default enrollment often includes an investment allocation that includes funds that are more expensive than necessary.