Newspaper article St Louis Post-Dispatch (MO)

The Widest Option on 401(k): Do It Yourself Employees Select from Universe of Investments

Newspaper article St Louis Post-Dispatch (MO)

The Widest Option on 401(k): Do It Yourself Employees Select from Universe of Investments

Article excerpt

Given the thousands of flavors that investments come in these days, the situation is hardly unexpected: Many workers chafe at the handful of options that their companies have selected for their 401(k) retirement plans.

"Why is there no bond investment in the mix?" they may ask. "And why not include this delicious foreign equity fund?"

Responding to these kinds of complaints, as well as to government guidelines on the subject, companies have added to their 401(k) menus in recent years, expanding from the three or four funds that used to be standard to a dozen or more.

But they have also begun to embrace a radically different option that can forever put to rest the complaints about too little choice, even if it can be risky for many workers. It is a self-managed 401(k) account that lets an employee choose among thousands of stocks, bonds and funds while still being able to invest in the plan's other choices.

H.D. Harden Jr., an industrial engineer, has embraced the new alternative. When his employer, the Westinghouse Motor Co. in Round Rock, Texas, added the self-managed option this year, he realigned his 401(k) to put $11,000 in the account, which is held by Charles Schwab Corp., the discount broker.

Harden can now do things he never could before with his 401(k). Since March, he has bought individual stocks like Cypress Semiconductor and Pepsico. And his new investment horizons excite him. "I was intrigued by the challenge," he said, noting that he had never before bought stocks directly.

Yet he also typifies the concerns of those who are worried by the rise of this approach, sometimes called the "brokerage" option: After just a few weeks, his $11,000 has been reduced by nearly $500 in stock-price declines and commissions.

Nonetheless, such self-management is growing. The State Street Bank and Trust Co. in Boston, for example, oversees such plans for 45 companies, including Pepsico.

The option turned blue collar in April when the International Brotherhood of Teamsters developed a model 401(k) plan that included it with five other investment alternatives, including a bond fund, a diversified stock fund and a Standard & Poor's 500 index fund.

About a million Teamsters will be eligible for the self-managed option, which was developed by State Street, if their employers agree.

Whether union members embrace the option or not, many retirement experts suspect it will pop up more and more. It is already a feature of 3.2 percent of profit-sharing and retirement plans, according to a survey by the Profit Sharing/401(k) Council of America.

"We've found that the interest is very wide and that it cuts across all industries," said Tom Schlossberg, the president of Diversified Investment Advisors in Purchase, N.Y.

The firm began offering the self-managed option to its clients - which together administer 401(k)s for about 350,000 employees - about a year ago. …

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