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don't settle default investment option

Soar Strong Like Queen B: To The Left Default Investment!

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Welcome to another episode of Retirement Jargon Sampler. Wicka wicka whaaaaah!?

Allow me to drop a beat while we break down the complicated world of 401k management.

(If you missed the blooom team’s first track, the beautiful echoes of a 401k, check it out .)

Track #2 DROPS NOW! It’s Titled “Default Investment Option”

Watch me translate the jargon as I break it down flip it and reverse it….

“You must not know ‘bout me

You must not know ‘bout me

I could have another you in a minute

Matter fact he’ll be here in a minute, baby

You must not know ‘bout me

You must not know ‘bout me

I can have another you by tomorrow

So don’t ever for a second get

To thinking you’re irreplaceable …”

— Beyonce from “Irreplaceable”

Queen B’s got it all right. Your 401k is all about not settling, not letting anyone hold you back from crushing it!

To me … a default investment option is the definition of settling.

A default investment option exists because the companies offering a 401k need an easy way out. Try a little harder will you?! In some cases, it’s a one-track-fits-all spot to invest the money for each employee once that person has enrolled in the plan — if the employee hasn’t already chosen options for themselves.

Now, each employee has the ability to choose different options. But with more employers moving to automatically enrolling employees into their 401k plans, more employees could be going into the default investment option. These days, more often than not, the default option is a Target Date Fund. Meh.

Cerulli Associates (smarty pants research firm) estimates that by 2019 nearly 90 percent of new 401k contributions will be invested in Target Date Funds. 1. While this is better than a decade or so ago when your money essentially went into cash, it still seems like settling to me. We can do better, ladies and gents!

Let’s look at why …

Queen B Knows: Don’t Settle for Target Date Funds

Blooom slays cookie-cutter investing. An online 401k service that helps you invest across different products best matching your retirement goals. We watch out for a couple of problems with Target Date products—which are often loaded with gross fees.

Target Date Fund Default Investment
Your target date fund default investment option could be loaded with fees.

On top of that, Target Date Funds play everyone the same. So basic.

Do you and your BFF have the same fear tolerance of stepping to the mic at a Karaoke bar? Probably not. And then why would you have the same comfort level with investment risk?

And that’s how a Target Date Fund works. If your goal is to retire in, say, 30 years, you’ll be invested in the same way as other members of your retirement class. And we all know there’s no putting Bey in the corner.

But Wait, There’s More blooom Beats …

Find more retirement inspiration in the blooom Retirement Mixtape collection. All yours for two easy installments of … free! They’re full of hits from the blooom team, perfect for setting the mood in dreaming about the day you decide to retire:

We pulled together the collections because we at blooom LOVE helping you with your 401k or retirement, music and a good mixtape.

Give us a try if you’re feeling these jams. In fact, we have more than a love of music in common with Spotify … our easy online 401k service is also only $10 a month.


  1. Millennials: There’s A $454,000 Leak In Your 401(k) Forbes. May 12, 2016. https://www.forbes.com/sites/arielleoshea/2016/05/12/the-454000-leak-in-your-retirement-plan/#43c1586469ce

The information is provided for discussion purposes only and should not be considered as investment advice. Please consult an investment advisor before you invest.

Published on May 23, 2017