What the experts say
A 401(k) with less anxiety; Social media steals?; The right 529 plan for you
A 401(k) with less anxietyIt’s no secret that the 401(k) is “an awfully clumsy” tool for retirement savings, said Carolyn Bigda in Money. Too many people simply lack the market know-how and confidence to invest their savings intelligently. It’s as if workers “have been given a license for a machine they don’t know how to drive,” said investment adviser David Booth. To take the anxiety out of the process, providers have introduced a “small but growing category” of managed 401(k) plans in which savers can “all but ignore” their asset allocations. Participants don’t handle the investing, but instead focus on the critical decisions of how much to save and how much income they’ll eventually need. That way, they’re less likely to be “too aggressive during market rallies or too cautious after crashes”—and more likely to have what they need when they retire.
Social media steals?Social media stocks are down sharply, but bargain hunters have to be careful, said Brett Arends in The Wall Street Journal. Investors should be guided by two questions: whether the company can take advantage of the growth of smartphones and tablets, and whether a new upstart could “come in and steal its lunch.” Internet radio company Pandora, for instance, has seen its business model upended by the drop in ad money from desktop computers. Ailing game-maker Zynga and coupon company Groupon are in industries with few barriers to entry, meaning they are constantly vulnerable to challengers. “If the economics and staying power of a business are questionable,” said investment manager Allan Mecham, “then so is investing in it.”
The right 529 plan for youDo your homework before picking a 529 college savings plan, said Heather Struck in Reuters.com. These state-sponsored plans have varying fees, investment choices, and tax benefits, and some deserve higher grades than others. Morningstar recently gave top marks to plans in Alaska, Maryland, Nevada, and Utah, while those in Kansas, Minnesota, and Rhode Island were rated “negative” for having either high fees or offering questionable fund choices. Before you switch to a better-performing plan, be sure you won’t be on the hook for more taxes and fees. But since there’s no prohibition on having multiple plans, you can always stop contributions to one plan and start up another in a different state with no penalties.