By Kathryn Kretschmer-Weyland
April 2, 2007

Would you give a 16-year-old the keys to your car without ever teaching him how to drive? Since the result is likely to be a crash, we suspect not.

How retirement-plan participants invest is just as important as regularly deferring. Yet, plan sponsors who fail to promote resources that can help their workers successfully invest through the plan may be allowing their “drivers” to crash.

In fact, the 2005 Report of America’s Retirement Voice, Trends in Public Sector Plans, found that 34 percent of all participants were invested in one investment option in 2005 and 60 percent of participants investing in only one fund are in the fixed option.

Although being invested in only one fund can lead to a successful outcome for some participants, many others may find that their assets at retirement time fall far short of the expectations set at enrollment time — and that can lead to unfortunate repercussions for employers who, they believe, may have set those expectations.

The key may lie in giving participants a road map — an asset allocation strategy that’s appropriate for their needs over time. While no investment strategy can guarantee positive results, asset allocation can help an investor control risk, match a portfolio with specific financial goals, and increase the predictability of returns. It can help them not only drive better, but make it more likely that they’ll get to where they want to go.

The challenge for many participants is they lack the knowledge, wherewithal or interest in developing such a strategy. Or, while they may practice some form of asset allocation, they may not get all they can from the approach. So we need to give them some driver’s training — education that they can not only understand but use.

But not everybody wants to drive to get to their destination. They may prefer to use mass transportation. The most common solution for helping participants employ an asset allocation strategy that’s appropriate to their needs may be including lifestyle and lifecycle funds in your plan’s line-up. These funds provide a pre-packaged diversified portfolio that correlates to a specific type of investor.

Other participants are looking for something more customized. For them, a chauffeur may be most appropriate.

“Managed accounts” can provide that solution. The plan sponsor hires an investment advisor to structure participants’ portfolios. The cost for this service is generally based on an asset fee deducted from the account of participants who use it.

By helping employees understand how to use an asset allocation investment strategy, you can help them not only avoid crashes — but put them in the driver’s seat as they prepare for retirement through your defined contribution plan.

As always, all investors should consider the investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information. Potential investors are encouraged to read the prospectus carefully before investing.

Drivers training: Nationwide offers educational services designed to help public workers understand the many benefits of participation in employer'sponsored retirement plans — including the use of an asset allocation investment strategy.

Mass transit: Many Nationwide 457(b) plans offer Gartmore Investor Destinations lifestyle funds that allow participants to invest without having to figure how to mix and match funds according to their needs.

Chauffeur: Nationwide is building a managed account program that will offer participants investment management based on their age and risk tolerance. Stay tuned for details.

Nationwide Retirement Solutions is the administrator of The U.S. Conference of Mayors Deferred Compensation Program. For more information, call Kathryn Kretschmer-Weyland at 301-351-4350 or send e-mail to kweyland@usmayors.org