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A recent study shows that 53% of employees receive no investment advice about how to allocate the money that they contribute to their 401k plan. 

What we know to be true is that independent research as well as academic research in both the investment industry as well as in the area of behavioral finance, is that left to their own device, people make horrible investment decisions. 

For many, your company retirement plan is your sole means of investing. (That's a problem in and of itself, but that's a topic for another blog post at a later date and time.)

Here's what's likely to happen:

  • Market timing; you'll move money in and out of markets trying to beat professionals at a game that you really don't understand. Odds are great that you'll fail at this attempt, though the temptation of psychic comfort will hard to avoid
  • Concentration: not the good kind, as in working with focus, the kind where your money is nested in a singular investment or worse, in your company stock. Ask the folks at Enron how that worked out for them
  • Not engaging a Fiduciary as your partner: Fiduciary's are required to protect your best interest above all others; everyone else? Well they're typically out for a commission win at some point and likely sooner rather than later
  • Saving too little or saving too much: Yes, that's right, saving too much! There I said it. The reality is that you'll walk away from work before your age 70 and 1/2 which means you better have some non-retirement dollars to draw on to get you by. The government doesn't require you to take IRA or other distributions until that magic 70 1/2 age so if you have to take them earlier, congratulations you're now voluntarily paying taxes. If you do that, run the risk of giving back the bulk of the tax savings you had banked over a lifetime of making your plan deposits. Consider capping your contribution to the amount that you'll need to get your employer match and putting the difference in a tax efficient personal portfolio. That's the bridge that will get you from retirement to age 70 1/2 when your required to begin taking retirement withdrawals.

Bottom line is that saving for a rainy day is a good strategy, been around for a long time. 

But, that doesn't bely the fact that there's still a great way, a good way and horrible way to do that and you should find yours. The results will matter. A lot.