Stocks have been on a real tear lately, but guess who hasn't been along for the ride: the millions of 401(k) investors who "moved to safety" during the recession and never felt comfortable enough to move back to stocks.
Participants in 401(k) plans ended 2012 with less than half their assets invested in stocks, down from 59 percent at the end of 2006, Chicago-based Spectrem Group said last week. That's despite the fact that the Standard & Poor's 500 stock index rose 6.4 percent over that period and has more than doubled since it hit bottom in March 2009.
Emotionally driven investment decisions are just one of the trouble spots in 401(k) accounts now.
Another problem area is the so-called "rollover minute," when departing workers have to decide whether to let their 401(k) assets stay where they are, bring them to a new employer's plan or roll them over into a private individual retirement account.
In many cases, workers would be better off leaving the money in the 401(k), where fees are often constrained and investments are prescreened.
"For most workers, their 401(k) is their largest financial asset, and they have a right to full and fair information on all of their investment options," Rep. George Miller, a California Democrat and two Senate Democrats -- Tom Harkin of Iowa and Bill Nelson of Florida -- wrote to the Labor Department.
Workers who may be well aware of how important their 401(k) savings are to them might still be stymied by how to protect those savings as markets rise and fall.
Here are some tips.
Learn as much as possible. Too many disclosures are still being written in legalese, and employers and their representatives might be reluctant to offer actionable investment advice, especially if it involves taking risks. But it's your money, and you can't afford to wait for your employer or your congressman to optimize it for you.
Protect yourself from your own emotional decisions. An easy way to do that is simply to invest in the target date funds offered via most 401(k) funds. That will keep your percentage of stocks and bonds on track, regardless of how fearful or greedy you feel at any particular point in the market's cycles. Most well-developed 401(k) plans will automatically balance your assets for you, if you direct them to.
Look at your personalized performance figures and compare them to the performance of the funds you own. It's standard for good 401(k) accounts to offer this information. If you consistently do worse than the fund you invest in, that's probably because you are hurting yourself with your own trades.