401(k) plans underperform

There is a clear advantage to having a professional manage your retirement assets: more money (Pensions & Investments):

Defined benefit plan rates of return outpaced returns for 401(k) plans during the most recent bull market, according to analysis released today by Watson Wyatt Worldwide. Defined benefit plans outperformed 401(k) plans by 1.6 percentage points in 2006, 1.1 percentage points in 2005, 2 percentage points in 2004 and 1.7 percentage points in 2003.

Watson Wyatt also found that from 1995 through 2006, DB plans outperformed DC plans by an average of one percentage point per year, which would translate into a cumulative dollar difference of nearly 14% for money invested in 1995.

One significant difference between 401(k) plans and defined benefit plans is that the former are self-directed, meaning that investors choose among available investments themselves. The lesson for retirement investors is that if you enjoy DIY projects, head to Home Depot. With something as important as your retirement assets, don't go it alone — have a professional advisor help you figure out how to invest your 401(k) contributions.