401k Management: Bridging the Knowledge Gap with Best Practices

The 401k is one of the more ubiquitous retirement planning tools in the industry. Just about everyone has heard of them and millions of people have them; that pervasiveness has created no shortage of “experts” who will claim they know how to best manage their own accounts. In actual application though, a sizable knowledge gap has emerged between 401k holders who go it alone and the experienced financial professionals who can manage the complex factors of 401k investment and help maximize the results.

So just how big is that gap? Let’s look at some common misperceptions and myths. Many people believe all 401k investment plans are created equal. They aren’t. Every company 401k plan has differences and beyond that the right approach to investing in the company sponsored plan for one employee might be a bad choice for another. Therefore, asking your co-workers for advice can lead to disappointment, frustration or even being forced to put retirement off if the information you receive isn't tailored to your specific needs. Here’s another: the contribution amount your company is willing to match is how much you should be putting in. Wrong. For most people that number would fall short of what they need to contribute to successfully meet their retirement goals.

So, what should your contribution level be? Should contributions be pre- or post-tax or some combination of both? What should your investment allocation look like? Mutual funds? Stocks? Risk level? How often should the account be rebalanced? What happens when funds are added or removed? What happens to it if you change employers and when you retire? How does your 401k account work with your other financial assets to create a comprehensive plan?

So many questions, the answers to which can dictate not only the success of your 401k account, but the power and effectiveness of your entire retirement plan. Those answers can often be found on the other side of the knowledge gap, with financial planners and investment managers who spend their careers analyzing 401k plan investment options and aligning them against the unique financial goals of their clients.

Comprehensive investment management can lead to better client outcomes.

Don’t just find a financial advisor, find a comprehensive wealth manager. A meaningful part of most clients’ wealth is held both inside and outside their company retirement plans. Fundamentally, by providing ongoing investment management services that include assets in company retirement plans, your Foster & Motley advisor can further enhance the probability that clients will meet their long-term financial goals.

Discipline of investment process should be applied to 401k, 403b and other similar accounts.

Like with so many other things in life, out of sight can mean out of mind. Your 401k, or other company sponsored plan, is likely on a platform of its own so the investments are typically not reviewed or managed with the frequency or rigor that other managed accounts receive. An overallocation to company stock or infrequent rebalancing are side effects of this. Beyond that, some plans have requirements on how much company stock must be retained but many don’t, so it is important to evaluate company stock in the same manner as your other investment holdings; is it a fit with your asset allocation? Does play its part in reaching your long-term goals? Are you unnecessarily increasing risk by holding stock in the same company that you collect a paycheck from? A Foster & Motley advisor will incorporate holdings in an employer sponsored retirement plan account into your overall investment allocation for better consistency and results.

Slow investment implementation leads to lost opportunities.

Often, when retirement plans are reviewed it’s up to the client to implement the investment recommendations that the portfolio manager or financial planner provides. Sometimes, clients don’t implement recommendations or act on them with a significant delay. That inaction or delayed action can be very costly. If investment recommendations are made and implemented sooner, the client stands a better chance of making more money in the long run. A Foster & Motley advisor with full access to 401k and other investment vehicles can eliminate the delays and maximize results.

Easier for clients means better for clients.

By providing investment management services that include 401k retirement plan assets, Foster & Motley’s advisors can make the investing experience more streamlined and efficient for clients. Many clients are uncomfortable about the logistics of implementing recommendations or about terms they don’t fully understand (asset allocation, ongoing contributions, preferred stock, etc.) They also may be uncomfortable moving larger amounts of money around in their plans. Each of these may lead to hesitancy that a dedicated advisor can avoid.

It’s easy to overlook your 401k. It came with the job, but you might not have the time to manage it well, or fully understand all of its complexities or investment options. But your 401k has power, especially as part of your overall financial picture. Our 401k Management Service can deliver a holistic, detailed perspective to oversee your retirement plan assets with the same discipline and strategy that drives your entire portfolio.

Our team of expert advisors can help you navigate these important questions to optimize your 401k like never before.

Financial Advice

Managing Your 401k

with advice from one of Cincinnati's best 401k management companies