DIY Approach May Lead To Inaction In Retirement Investing

By Cyril TuohyInsuranceNewsNet

By Cyril Tuohy

Do it yourselfers – DIYers – really don’t do much when it comes to managing their retirement investments.

The most recent finding issued by Fidelity Investments begs the question: Is the DIY movement an excuse for inaction?

Fidelity analyzed 13 million 401(k) investors living in major metropolitan areas and found that 63 percent of them are taking a do-it-yourself approach to 401(k) investing.

Of that group, 54 percent are considered “unengaged,” meaning they have not made a fund exchange, updated how their contributions are invested or sought retirement investment guidance in at least two years.

“If 401(k) assets are not managed either by the individual or a professional, the account may be taking on too much or too little risk,” Jim MacDonald, president of workplace investing at Fidelity Investments, said in a news release.

With market fluctuations over long periods, the individual investors may find himself or herself “short-changed” by the time retirement comes along, he said.

Fidelity recommends that that solo or DIY investors seek help at least once a year to make sure they are adjusting their investments in accordance with their time horizons and risk tolerance.

The 63 percent of DIYers identified in the Fidelity survey means these investors take responsibility for their own investment decisions.

The remaining 37 percent take a do-it-for-me approach and use professional management such as target date funds or professionally managed accounts available through the workplace based on their needs, Fidelity said.

Whether workers invest for themselves or lean on professional help, the good news is that many Americans, at least those living in major metropolitan areas, are saving for retirement through a workplace account, the survey found.

The California cities of San Jose and San Francisco, home to Silicon Valley and the high technology industry, were singled out as metropolitan hubs where the savings rate is particularly high.

The typical worker in these areas put away 14.6 percent of his or her annual salary in a 401(k), the survey found.

“These cities lead the way with some of the most robust 401(k) savers in the country,” MacDonald added. “High savings rates and low proportion of outstanding 401(k) loans indicate that these U.S. workers are on the right path.”

In contrast, metropolitan areas where the average loan balance was highest were McAllen and El Paso, both in Texas; Riverside and Bakersfield, both in California, and Youngstown, Ohio.

In McAllen, 33 percent of retirement savings had an outstanding loan balance, the survey found.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.