Monday, August 23, 2010

Finanical companies should become ERISA ficuciaries and help workers stop premature 401(k) withdrawals

AOL was hopping this early Monday morning with a story that 401(k) premature withdrawals are soaring because of foreclosures and job losses. But when I went to check the story on Daily Finance, I found a criticism of Fidelity Investments by Daniel Solin, “How Fidelity could reform the 401(k) plan system, but won’t”, link here. The report says that the average 401(k) balance at mid 2010 was about $62000, hardly enough for “dignity.”

The article says that Fidelity should become a full 3(38) ERISA Fiduciary, a concept explained at Morningstar Advisor here (“The Different Flavors of ERISA Fidcuciaries” by W. Scott Simon. I remember a talk with Morningstar after Christmas at the end of 2001 after my layoff when the financial planner said in a phone call, “after all, you aren’t going to be working.” I was still 58 then.

The article says that Fidelity should limit its client portfolios to “low-cost, stock and bond index funds” and makes a comparison to Vanguard.

No comments: