misconception about 401(k) retirement savings

The Most Common Misconception That’s Disconnecting Investors from 401(k) Retirement Savings

If you’ve ever found yourself saying or thinking, “I thought my company took care of my 401(k) for me. I don’t need to do anything,” you’re going to want to keep reading. 

This belief–whether it’s concerning your current or past employer–is all too common among 401(k) investors. 

And it’s one that’s disconnecting investors like you from your money, and potentially keeping you from maximizing your retirement savings.

Misconception #1: Current Employer Taking Care of Your 401(k) for You

My son recently started a new job with an employer that allows him to invest in a 401(k). They even provide a decent company match. 

When he received his welcome letter and kit in the mail, he reached out and asked if I’d look it over for him.  

I discovered his company had automatically enrolled him in a target date fund, and he would not be able to make changes for 30 days. 

They never spoke to him about his plan. They simply mailed him a packet, and he was on his own to figure it out. 

misconception Disconnecting Investors from 401(k) Savings
It’s not uncommon for an employer to automatically enroll investors in a target date fund, give them the plan welcome packet, and that’s that. 

In fact, Marketwatch recently reported, “About 70% of U.S. companies automatically enroll employees into 401(k)-type plans, and more than 86% of these firms now direct people’s money by default into ‘target-date funds’ (TDFs).”¹

JP Morgan estimates that 88% of new retirement plan contributions are expected to be put into target date funds by this year.² 

It’s also not uncommon for average investors, like my son, not to understand exactly what it is they are investing in.  

Instead, many assume their company is taking care of their 401(k) for them, and don’t reach out to a third-party expert for help

Misconception #2: Past Employer Taking Care of Your 401(k) for You

Bob recently came to my house to fix the air conditioning. As he was leaving, I thanked him for his quick response and fixing the air. 

Just out of curiosity, I asked if he had a 401(k). 

“Not with my current company, but I have one from a past employer,” Bob replied.  

“Have you ever thought about moving it or rolling it over?” I asked.  

He shook his head. “No, I don’t need to. My past employer is taking care of it for me.” 

This didn’t shock me because Bob is not alone in his thinking. This is a comment my 401(k) Maneuver™ colleagues and I hear from many 401(k) investors. 

And it’s one of the biggest misconceptions about 401(k)s that people have… 

One that’s potentially costing investors more retirement income and may prevent them from reaching their retirement income goals. 

Here’s something that happened to a client of one of our advisor’s Brian Neff…

Susan’s past employer had a plan through JP Morgan Chase. Since she left the company, they decided to switch to Fidelity because they offered a better plan. 

Because of the way the plan documents were written, Fidelity could not invest one dollar of Susan’s money because they didn’t have an agreement with her since she was no longer employed with the company. 

Susan had left her past employer 10 years ago, and it was 9 years since her old company switched plans. 

So, Susan’s money just sat. 

Remember, because of the way the new plan documents were written, the new company could not invest the funds for past employees. So, unless Susan rolled over her old 401(k) into a new 401(k) or into another investment such as a personal IRA, the money would not earn interest or grow like Susan expected it to

Assuming her past employer was taking care of her 401(k) for her, Susan didn’t roll it over. Didn’t touch it. Didn’t really think about her investments. 

misconception Disconnecting Investors from 401(k) Savings
That’s 9 years Susan’s retirement money sat in cash!!!

For example sake, let’s say Susan had $50,000 invested in her 401(k) when she left her past employer 10 years ago. 

Assume she could have earned an average 6% interest on that investment each year for the past 10 years. 

On her $50,000 invested, assuming she didn’t invest any more money, she might have earned an additional $39,542.38 over the 10-year period had that money been invested in a 401(k) and not been in cash. 

This is a sad story that happens to too many investors. 

If you have a 401(k) with a previous employer, roll it over into your new company 401(k) or an IRA. 

Avoid these 5 irreversible and costly 401(k) rollover mistakes. Download our free guide today

Misconception Disconnecting Investors from 401(k) Savings

The Bottom Line

It’s up to you to manage your 401(k). 

Your employer (current or past)…

  • Cannot make changes to your 401(k) for you. 
  • Does not manage your 401(k) for you. 
  • Will not take care of your 401(k) for you. 

Most Common Misconception callout
It’s your account, not theirs. It’s your investment. It’s your money.  

Sadly, our industry has disconnected mainstreet investors from their money and control over their account performance in very sophisticated ways. 

But it is possible for you to take back that control over your future. And it’s not as difficult to understand your investments as you’ve been led to believe

The first step is to educate yourself.  The fact that you’re reading this blog post is a good sign. 

The second step is to reach out to a third-party expert for advice. 

You wouldn’t make major health decisions without the advice of a doctor. So, why turn what could be your largest financial asset over to chance?

Many people are taking advantage of the recommendations provided by 401(k) Maneuver that may help to optimize their workplace retirement accounts. 

It is designed with busy people in mind, so it is incredibly efficient.

By receiving your Quarterly Allocation Recommendations, privately via email, you can have clarity about what to do and the confidence to go for it.

The two primary objectives of 401(k) Maneuver™ are to improve your account performance and better manage downside risk when times are tough.

Enroll Today!



  1. MarketWatch, Opinion: Target-date funds are more expensive and less effective than this simple investment plan, February 20, 2019
  2. Why Target Date Funds Dominate The 401(k) Market, Forbes, June 2018
  3. http://www.aon.mediaroom.com/new-releases?item=136959
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