Pros & Cons on Default Investments in 401k

[Guest willwork4shoes]

Have a client that wants us to give him the pros & cons on default investments. Using a Money Market account versus a balanced or lifestyle investment funds in lieu of investment direction. Does anyone have anything on this issue? Would be greatly appreicated.

[KJohnson]

https://institutional5.vanguard.com/VGApp/i...efaultFund.jsp#

[alanm]

It is more complicated than taking a balanced fund. For example, a participant age 65 who moved their account to the money market to avoid risk is suddenly defaulted to a balanced account in a plan merger. You have given the participant risk he shouldn't take, maybe. In any case, if the blackout period is less than a few weeks and the participant can make an investment change after that time, I would feel more comfortable putting them in the money market. They can sue you no matter what you do, but I have been defaulting to the money market for years and never had an issue in 500 plan mergers. It all comes down to the notice and the time you keep them out of the market.