401k Plan Issues
401(k) plans have become the dominant retirement savings plans for US workers over the past 25 years. While they have been improved over this time, there are still additional issues that need to be addressed with these plans. There are structural flaws associated with investment contributions, specifically dollar-cost-averaging. It works well if the market is trending up over time but not so when the market in oscillating in a flat range for years, or if the market is trending down.
Because 401(k) plans have been touted as long-term retirement savings plans, most people were led to believe that they should develop a long-term strategic asset allocation with a time-horizon exceeding ten years. However, the portfolio managers who are managing your 401(k) are unlikely to have that long of a time horizon, so that index funds are actually a much better fit with a long-term focus then a 401(k) portfolio.