The perfect plan: CPAs in the right position to help 401 (k) plans and participants.

• Author: Rothenberg, Irv
• Position: Financial planning

Though confidence in being financially ready for retirement is at an all-time tow, CPAs are in place to be a big Kelp to those looking to secure their futures.

According to the Employer Benefit Research Institute's Retirement Confidence Survey, 2B percent of respondents said they were not at all confident that they would be able to live comfortably in retirement, This is the highest percentage in the 23 years the EBR.J has been doing the survey. Such fears put employer-sponsored retirement savings plans, such as the 40] (k), directly in the spotlight, as 82 percent of employees contribute to such it plan if it's offered.

However, many such plans fall far short when it comes to providing the best experience for individuals looking toward retirement. This is true whether looking at the situation from the participants' side or the plan sponsors' side. This is where a good financial adviser can add significant value in helping people with their financial futures.

Examining the Evidence

Ran participants make a number of mistakes regarding their retirement assets. One of the most common mistakes is to time ton high of a percentage in company stock.

In 2002, the EBRI noted that about 20 percent of 401(k) assets were held in company stock. Thanks somewhat to meltdowns by companies such as Enron and WorldCom, that percentage dropped hr alarm 11 percent by 2006, which is still a significant portion of a retirement portfolio ("Beware of Investing in Shares of Your Company's Stock," Investopedia, Oct, 24, 2012). Those types of collapses should serve as a reminder of why investors shouldn't devote so much of their portfolio to a single investment.

In addition, investors often make other poor choices regarding their 401(k) funds One study (bund that employees won't hold mote than three or Tour funds, regardless of how many fond choices were offered (Gur Huherman and Wei Jiang, "Offering Versus Clarice in 401 (k) Plans," Journal of Finance, 2006).

Participants aren't the only ones who make poor decisions regarding retirement plans, Plan sponsors have a significant responsibility to their participants, yet the evidence has shown that they can struggle considerably in fulfilling their duties.

Here's why ills important to make sure the right funds are being chosen for 401 (k) offerings, A recent study looked at the performance of the plan administrators in their fund selections as well as the performance of the participants (Ed Elton, Martin Gruber and...