10 Overblown Reasons

MSN should have named this 10 overblown reasons why you shouldn't get investment advice from the mainstream media.

At some point or another during my stockbrokering days, I have worked with just about every 401K administrator out there. Some were more responsive than others. Some were more forthcoming than others. Some were easier to work with than others. But in no case did I ever see an administrator who was flat out dishonest.

Look at the ten warning signs here (which were apparently provided by the Department of Labor):

1. Statement is consistently late or comes at irregular intervals. Could be a problem, sure, but the problem is more likely with either the post office or with the company stuffing the envelopes for the administrator.

2. Your balance doesn't look accurate. Might it just be bad investment choices? I've seen quite a few mutual funds that have lost significant amounts in a very short time.

3. Your employer didn't send your contribution to the plan in a timely manner. For the employer this is a very bad choice. For the employee, if you see this happening, first check to see if it's a clerical error. If not, start looking for a new job. Your one contribution is the least of your worries at this point.

4. Your balance has dropped significantly and can't be explained by market ups and downs. This almost assumes some sort of illegality on the part of your employer. See #3 for how to handle it. And, for what it's worth, 99.999% of the time, even extreme drops can be explained by market movement. Deal with it.

5. Your statement shows that the contribution from your paycheck was never made. Go back to #3 again. Common sense should tell you to question it the first time the contribution is missed. If you miss both April and November (7 months apart), you earned one of the losses through neglect. This is supposed to be your money. You need to be watching it.

6. Investments listed on your statement aren't the ones you authorized. Realize that in most cases, the administrator will be able to pull some kind of phone record or computer log showing that you, in fact, made the change - probably without realizing it.

7. Former employees are having trouble getting their benefits paid on time or in the correct amounts. I found two words to rectify this problem: fiduciary responsibility. Firms don't like to lose the assets under management, but they want even less to pay for a loss incurred due to their foot dragging.

8. There are unusual transactions listed, such as a loan to your employer, a corporate officer or one of the plan trustees. This one, especially with their example, just really doesn't make sense. It almost sounds as if they're hinting at illegality, only to turn around and say, but it might be ok. Companies get creative in their executive compensation plans nowadays. Some of the things look shady and some of them probably are shady, but without a fair amount of deeper research, you're in no position to know simply from a line item on a report.

9. There are frequent and unexplained changes in investment managers or consultants. Managers and consultants move on all the time. The different administrators are constantly working to improve the quality of the offering. Chances are, if your employer is changing administrators, they're probably trying to improve the plan.

10. Your employer has experienced severe financial difficulty. If your employer has experienced a financial difficulty severe enough to warrant tapping retirement contributions for operating funds, then you should have been looking for another job for a while anyways. Putting food on the table should be more important than retirement, and the food on the table routine is at risk.

The biggest thing with all this is to simply pay attention. Your retirement funding is your retirement. Not your employer's. Not the administrator's. Not your stockbroker's. None of them have a vested interest in making sure that you succeed. Only you do.

Keep an eye out on your investments. No one else will do it for you.

All 10 of these warning signs are way overblown. In the entire time I was a broker, I only ever dealt with one, #7 and that was very infrequently. If you want to be successful, spend more time researching your investment choices and less scouring the Summary Annual Report.