Don’t Let Your Employer Choose Your 401(k) Investments
06/09/25
When you enroll in your company’s 401(k), it’s easy to just “set it and forget it,” especially if your employer offers a default investment option. But letting your employer choose your investment options via the plan’s default settings isn’t always in your best interest. Here's why taking the time to review your options can lead to better long-term results.
1. The Default Investment Isn’t Personalized
Most employers automatically invest your contributions into a target-date fund based on your age. While these funds offer convenience, they’re built for the average person and not you specifically. Your risk tolerance, other savings, retirement goals, or even personal values may not be reflected in the default choice.
2. Risk May Not Match Your Needs
Default investments may not be aggressive enough if you’re young and have decades to invest, or they might be too risky if you're nearing retirement. Choosing your own mix of investments allows you to align your 401(k) with your unique timeline and comfort with market ups and downs.
3. The Control Isn’t In Your Hands
Default investments, such as target date retirement funds, may automatically decrease your risk over time even if you aren’t ready to do so. Choosing your own investments gives you control of when you want to increase or decrease risk.
4. More Options Than You Think
Many 401(k) plans offer a decent variety of funds including growth funds, index funds, bond funds, and sometimes even sector or international funds. By working together, we can build a portfolio that’s more tailored to your goals than the one-size-fits-all default.
The Bottom Line:
Your 401(k) is one of the most important tools you have for building long-term wealth. While it's tempting to let your employer's default choice do the work for you, reviewing your options periodically can help you take control, take the right amount of risk and stay aligned with your retirement goals. Small changes now can make a big difference later.
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*Please contact me to talk about your specific situation. You are never charged for meetings or advice.