If you participate in a 401k, chances are you’ve been confused with the choices offered.
There’s a few reasons for the confusion.
First, the options offered to you are written in terrible legalese that requires you to have someone explain it to you.
When you call-in to ask questions, the rep you talk with is often more confusing than the website.
They’ll tell you to read all about the funds by going to a certain link.
(Seriously, who has the time to read about all the mutual funds offered anyway?)
Second, the lawyers design it this way to get you to default to the choices called “Strategic Target Programs for 2044.” (or whatever year you plan on retiring)
These are the worst things in the world to buy.
Caution! Stay away, NEVER, EVER buy them.
These are packaged programs that ALLEGEDLY target specific dates for maturity. They’re supposed to include bonds that mature on or near the date of your retirement.
Sounds great, doesn’t it? All you have to do is simply “set it and forget it.”
It even seems like you get a guaranteed rate of return. But nothing could be further from the truth.
You see, the fund managers of these “Strategic Target Programs” often have a lot of garbage bonds stuffed into their portfolios.
Many of these bonds are “leftovers” that the fund manager can’t get rid of. So, they’re packaged with some stock funds and labeled as “conservative” investments. (Remember the 2008 meltdown caused by the alleged “AAA” guaranteed mortgage bonds?)
I don’t have time to go into that now but, read more about it (HERE) or tune in tomorrow for more details.