Treasury secretary’s comments on 401(k) criticized

The Treasury secretary recently made comments about Americans’ retirement savings that raised concerns. In an appearance on “Meet the Press,” Secretary Scott Bessent said, “Most Americans in a 401(k) have what’s called a 60/40 account.” He added that these accounts are down 5-6% on the year. However, Bessent’s statements are misleading. While many 401(k) investors do put money in funds with a mix of asset types, only a small fraction maintain a 60/40 balance of stocks and bonds. According to data from the Employee Benefit Research Institute and the Investment Company Institute, 41% of 401(k) assets were in hybrid funds, such as target-date funds, at the end of last year. 71% of all 401(k) assets were in stocks. Younger, less experienced 401(k) investors in their 20s and 30s had close to 90% of their investments in stocks at the end of 2022.

Treasury secretary misleads on 401(k)s

This high stock exposure means more volatility during market downturns, which can frighten investors and lead to selling at the wrong time. Fear-based selling could mean missing out on future gains. Bessent, who is in his 60s and wealthy, may have fallen into the trap of anchoring to his own stage and place in life when discussing personal finance. He now has access to a federal employee workplace retirement plan that is one of the best available, offering many low-cost target-date funds. While a balanced approach to investing is generally a good thing, Bessent’s comments ignore the real fear and pain that stock market declines can cause for many Americans. The Treasury Department did not respond to a request for comment on the secretary’s statements. Image Credits: Photo by engin akyurt on Unsplash