FeeX, a service that helps investors find and reduce hidden fees within investment and retirement accounts, found that three-quarters of people ready to retire are dangerously exposed to the stock market. “We looked at 10,000 users of our product that we believe are representative of the U.S. market,” Erik Laurence, vice president of marketing and business development at FeeX in New York City, tells PLANADVISER.
Specifically, the study found 82% of investors ages 60 to 65 are improperly exposed to stocks at this critical time in their lives. Three-quarters have too much of their assets riding on the stock market, while only about 7% have gone too conservative at this stage in their lives. FeeX says investors in this age group should have from 25% to 60% of their portfolios in equities.
On the other hand, the study found that nearly half (48%) of investors ages 20 to 25 (40 or more years from retirement) are over- or underexposed to equities. Nineteen percent have an allocation to stocks that is too low, and 29% are over-invested in stocks. FeeX says this age group should allocate 80% to 95% of their portfolios in equities.
The analysis covers a variety of retirement savings vehicles, such as individual retirement accounts (IRAs), 401(k)s, 403(b)s, 457s, brokerage accounts and more.
Among investors ages 40 to 45, which the firm says should be 70% to 90% invested in stocks, 55% have age-inappropriate portfolios: 39% are overexposed to stocks, and 16% are too conservative.
“I think the solution is to get the message out there, which is one of the things we do,” says Laurence. “There’s a need for tools to make it easier for people to understand whether they’re getting it right or not. Investors are exposed to all kinds of education and materials; some people understand and some don’t.”
Laurence explains that investors can go to www.feex.com, set up a free account and link their retirement account or other investment account to FeeX. The firm provides an analysis that can find hidden fees and make observations to help investors improve their situations. “We hope we’re providing a valuable service to help people know what they’re paying in fees and how to invest properly,” he says.
Laurence reveals that FeeX is working on another study that will show what fees retirement plan and other investment account users are actually paying.