For many workers, a 401(k) plan is the cornerstone of their retirement plan. With defined benefit plans disappearing, Americans are now charged with making sound financial planning decisions, often with little professional assistance from an advisor.
While millions of Americans rely on a 401(k) plan as their main source for retirement savings, it's safe to say the decisions they make when managing these plans could make or break those nest eggs.
Unfortunately, various studies have revealed that the average 401(k) balance for a 65-year-old is estimated to be around $25,000, hardly enough to maintain one's lifestyle after leaving the workforce.
(Read more: You are your 401(k) plan's worst enemy)
Moreover, many participants reportedly fail to review the selections in their plan or reallocate the portfolio, which may lead to long-term holdings that are inconsistent with their current risk tolerance and time horizon. This should come as no surprise, given that hands-on investment advice is seldom made available to 401(k) participants. Even when the proper tools are at their disposal, it's apparent that investors aren't taking full advantage of them.
Despite the fact that the advisor of record for a firm's 401(k) plan has a fiduciary responsibility to offer investors a diversified mix of securities, the level of advice afforded is rarely continuous or sophisticated. As a consequence, many workers find their nest egg unattended to, likely because many financial advisors are unable to be compensated from 401(k) assets and instead focus their efforts on money held outside of 401(k) plans.