For many Americans, a 401(k) is their largest investment account and their primary vehicle for building retirement wealth. Yet it’s surprisingly easy to forget all about it. Contributions come out of each paycheck automatically, statements get buried in your inbox, and years pass without a single adjustment.
There’s nothing inherently wrong with a passive approach. However, if you’re not reviewing your investment selections and your overall progress toward retirement, you may be missing out on major opportunities to improve your account’s long-term performance.
The “Set It and Forget It” Trap
The passive growth mindset is widespread. Financial studies have shown that the majority of 401(k) participants aren’t paying attention to their accounts at all. Year after year, they’re under-contributing and ignoring their monthly account statements.
Providing clear guidance and structured oversight, Bison helps participants navigate the complexities of SDBAs, making self-directed investing accessible, understandable, and aligned with long-term retirement goals.
With Bison’s support, investors can explore a broader array of investments, including individual stocks, ETFs, and other financial instruments, while maintaining a disciplined approach to risk management. The platform ensures that participants have the tools and education necessary to make informed investment decisions, balancing flexibility with prudence.
Let’s look at the data: 46% of all 401(k) participants didn’t open a single statement last year and a staggering 72% haven’t changed investments since the day they enrolled. ¹
This implies that, for most workers, the investment choices sitting in their 401(k) right now are the same ones they hurriedly selected on their first day of work. Fast forward through their career, and that portfolio may no longer make sense given their age, goals, or the economic environment.
This is the infamous “set it and forget it” trap.
It may masquerade as passive investing, but it’s actually passive neglect. The market isn’t standing still. Fund managers change and allocations drift. Contributions that seemed safe at 3 percent may become stale when your salary has doubled.
The “set it and forget it” approach is a slow leak in the roof of your retirement. It doesn’t feel urgent until the ceiling caves in. By the time most people notice, the preventable damage has been compounding for years.
A Word on Target Date Funds
Target date funds are the most popular investment choice in 401(k) plans today. They’re frequently the default option for participants who don’t make an active selection. For those who would otherwise make no investment decision at all, target date strategies are better than nothing.
This variety of investment vehicle automatically adjusts your portfolio over time. It begins with growth-focused assets like stocks, then gradually shifts to safer assets like bonds as you get closer to the target date.
But there’s something the fund companies don’t tell you: Target date funds almost always chronically underperform vs. actively managed strategies.
Common TDF Pitfalls
The underperformance of target date stems directly from the structure of these funds:
– Target date funds are funds of funds, meaning you pay two layers of fees even when expense ratios appear low.
– Target date funds follow a rigid glide path that mechanically shifts allocations regardless of market conditions. The formula doesn’t care whether we are in a bull market or a bear market.
– Target date funds are designed for the “average” investor, not for you with your specific age, risk tolerance, other assets, and retirement timeline.
– Target date funds can’t take advantage of tactical opportunities, sector rotation, or the dynamic positioning that active professional management enables.
How Active 401(k) Management Changes the Game
Research has proven that professionally managed retirement accounts outperform self-managed accounts by an average of 3.3%2 annually. That difference may not sound dramatic at first, but over several years, even a single percentage point of additional growth can translate into hundreds of thousands of dollars.
Most employers provide between fifteen and twenty-five funds for your 401(k) in a preset investment menu and allow their employees to opt in to a few when their account is first created. As time goes on, the challenge isn’t just choosing the best investments. It’s maintaining the right contribution rate, staying diversified, avoiding emotional decisions during market volatility, and making smart adjustments as circumstances evolve.
If you’re not sure whether your current 401(k) strategy is helping you reach your retirement goals, Bison Wealth can help. Our fiduciary advisers work with participants to evaluate their existing accounts, identify opportunities for improvement, and create a strategy designed to maximize their retirement potential.
Your 401(k) is too important to leave on autopilot. Schedule your first adviser meeting today.
Footnotes
- PSCA Annual Survey; Vanguard: How America Saves Report; Fidelity Investor Insights Study.
- Industry studies show that professionally managed 401(K)s on average earn 3.32% more than participant managed according to the “Help in Defined Contribution Plans” report conducted by AON Hewitt. Bison does not warrant or guarantee that your account will experience positive gains or similar results as those noted in the study.