Effective on January 30, 2013, Chrysler made some major changes (or as Chrysler likes to put it, “enhancements”) to the Hourly Employees’ Deferred Pay Plan, the Salaried Employees’ Savings Plan and the Employee Managed Retirement Plan (401k accounts), all offered through Merrill Lynch where Chrysler plans are custodied through.

Chrysler, like many major companies have streamlined its plan choices for cost reduction, as well as what they feel are improvements for the employee. Depending on your comfort level with choosing investments, these new plan features may or may not be an improvement for you. If you are confident in your ability to research your employer’s 401(k) investment options and make your own choices, or you are fortunate( like our clients) to have an experienced financial advisor assist you in your decision- making process, the reduction in plan choices is not a welcome change; less choices is never a good thing.

When it comes to investing, I am an advocate of choice – the more choices a person has the better. If you deduct the dozen target date funds and the money market fund from the new plan choices, you are left with a whopping TEN choices of indexes and “fund of funds” that Chrysler has put together (five US/three International and two US bond). If you are not familiar with a Target Date Fund, it is a hybrid fund of stocks and bonds that automatically grows more conservative as you reach the “target” date which is supposed to be the date that you will retire. All Target Date funds are not the same and can underperform.

Chrysler, like many other employers, seems to feel that a more simplistic, less-is-more, approach to investing is better; however, I think it only hurts investors who actively manage their accounts. Fortunately, Chrysler does offer a self-directed brokerage option. So, if you like to invest in stocks, ETFs and fixed income securities, you are all set – you just set up this option, move your money into this account and invest accordingly. However, if you are like me and like the wide array of no-load mutual funds that are available, then you are out of luck. That’s, because Chrysler does not allow you to invest in mutual funds through the self-directed brokerage option. I have never understood this restriction.

Chrysler also offers what it calls “Advice Access”. If you don’t necessarily want to choose your own funds and don’t know if you want a Target Date fund, Advice Access will give you recommendations based on your age and account value and current contribution rate. It will also give you recommendations on whether you should contribute more both inside and outside the plan. However, as stated in their literature, this advice is based on a “probabilistic” approach and does not consider your comfort level of investment risk, nor does it give you specific investment advice for outside assets. I do not agree with this approach as age has little to do with how you invest your money, while your individual goals and objectives and your risk tolerance are very important to how you should invest your money. If you don’t have a financial plan in place and need some guidance with your investments, you should seek the advice of a qualified financial professional.  If you are a Chrysler retiree and never rolled your plan to an IRA, this would be an excellent time to do so.

This will allow you better investment options for your retirement goals. If you have a financial advisor, they would be able to assist you with this. If not, and you need assistance, Bloom Asset Management would be happy to review your account and give you our recommendations.

Just a reminder that if you are a Chrysler Employee of Retiree, you must make changes to your plan by March 1, 2013, or Chrysler will automatically move your account to one of the Target Date funds that is based on your approximate age of retirement (65). Again, if you are a Chrysler Retiree, you should also seriously think about rolling your account to an IRA prior to March 1, 2013.

I believe we should all take a proactive approach when it comes to our money and investing. Don’t leave your accounts on auto-pilot; you should always have a plan and know how your money is being invested.

-Cindy Szymanski, CFP®, Financial Advisor
Bloom Asset Management