401(k) Apathy Cuts Dangerously Deep

Following the economic meltdown of 2008, many 401(k) participants are taking the ostrich approach to investing. In a just-completed survey of middle-income investors conducted by I-Pension LLC, 27% of respondents admitted to not even opening their fourth-quarter statements. And of the respondents who did open and read their statements, almost a third spent less than one minute reviewing the results and 72% spent less than 3 minutes.

Just as tellingly, one-third of 401(k) investors had no idea what percentage of their account was invested in U.S. stocks, foreign stocks, or fixed income. Of those respondents who professed knowledge of their asset allocation percentages, 64% stated that their fixed income holdings represented 0-25% of their portfolio, suggesting an extremely aggressive approach to the market despite the huge losses of 2008.

The scariest finding of all was that 55% of respondents never rebalanced or changed their investment options in 2008, despite the fact that rebalancing is a key component of any successful investing strategy. 82% of respondents indicated that they made their 401(k) investment decisions on their own; while the exact same percentage said they would be likely to request assistance if their employer provided access to investment advice.

"These results point out that a lot of work still has to be done to help 401(k) participants maximize this incredibly valuable workplace benefit," said Jane Mancini, CEO of I-Pension, in a press release. "The markets were down dramatically in 2008, but well-diversified portfolios were still the best choice for most investors," she added.

"Most employers and 401(k) platforms provide participants with printed and online educational materials and leave it at that," explained Phil Fragasso, President of I-Pension, in the release. "It's akin to teaching people to read simply by giving them access to a library. It hasn't worked in the past and there is nothing to suggest it will work better in the future," he said.

"If there's one positive that has come out of the horrible economic news of the past year, it's the realization that middle-income workers need serious and intensive help managing their investment portfolios," added Mancini. "Working together, plan sponsors, 401(k) providers, and investment advisors need to deliver a more hands-on solution in an easy and affordable package," she noted in the release.