Is your 401k optimized?

Is Your 401(k) Performance-Optimized?

Few subjects in financial planning are more important than the optimization of your workplace retirement account, yet many Americans are asleep at the wheel. The events of the past have systematically caused many Americans to almost completely disconnect with the most valuable tool that dictates what their retirement lifestyle will look like.

Let’s face it: America has been beaten up like a prizefighter, waiting for the last punch that could be the knockout. The American worker has endured the bear markets or corrections of 1987, 2000, 2001, 2007, 2008, and 2015. If they were knocked out of the fight in those years and never got back in, they potentially suffered even worse.

Imagine taking a beating in those years only to go back to the corner for instructions on getting back into the game, instructions delivered in a language you can’t decipher. For decades, the investment world has shouted advice at the American public in a language they have little hope of understanding.

The game is constantly changing, and what seemingly worked yesterday doesn’t necessarily work today. That causes a lot of disconnect! How many punches can a boxer take before it’s time to retreat to the corner, cover up, and wait until it’s over? Many Americans feel like they’ve lost control of their workplace retirement plans and are retreating to “the corner.”   

Workplace retirement plans, like 401(k)s, 403(b)s, 457s, and TSPs, are supposed to be the vehicles to freedom in retirement: a lifestyle full of choices, abundance, chasing dreams, and passions. That’s what retirement is supposed to be, but for many Americans, it can be quite the opposite.

An underperforming workplace retirement account can lead to a retirement full of anxiety. It can be caused by a perceived lack of choices, fear that the money saved will not be enough to last a lifetime, and disappointment that they didn’t know reliable and unbiased help was available to optimize investment choices. It can be the difference between a local “staycation” and a luxury vacation in retirement.

Many Americans have been led to target date funds (TDFs) as a solution to end the frustration and embarrassment of not understanding investment jargon, and they have been told that “someone else who knows better” will take care of the choices for them. They’ve been misled that TDFs will best protect them in bad markets and as they near retirement.

Morningstar analyst Jeff Holt recently commented, “In the long run, the biggest risk in target date funds is that they won’t meet investor expectations for avoiding losses.”(1) In an article on Forbes.com, Jay Ritter reported, “Target date funds don’t necessarily reduce the risk that an investor is exposed to as one gets older. Most target date funds still leave an investor exposed to, and may even increase the exposure to, the risk of a bond market collapse associated with high inflation.”(2)

Workplace retirement investors can help increase their chances of optimizing the performance in their accounts during good and bad markets by simply rebalancing them on a quarterly basis per current market conditions and their tolerance for risk.

A recent report by Aon Hewitt found “that, on average, employees using (quarterly rebalancing) help had median annual returns that were 3.32% higher, net of fees, than participants managing their own portfolios.”(3) Over time, that could mean a lot more freedom in retirement for many Americans.

If quarterly rebalancing can be so beneficial to the performance of workplace retirement plans, why do so many Americans fail to do it? Many retirees don’t understand how to choose investments in a changing economy as they go through different stages of their life. They don’t know where to turn for unbiased and reliable advice, and many simply don’t understand that they have the ability to make changes to their workplace retirement plans.

One possible solution to the frustration, embarrassment, and disconnect to workplace retirement plans is 401(k) Maneuver(TM). This program offers workplace retirement plan participants the ability to receive independent, fiduciary-based advice tailored to their risk tolerance and current market conditions each quarter. Participants can easily rebalance their accounts each quarter, when they receive allocation recommendations, using their own workplace investment menu, via email, without ever having to meet with a plan salesperson who may speak in a language they cannot understand. For more information, visit the 401(k) Maneuver website.

Americans can take their hands away from their eyes in the hope they will have enough for retirement. They can take back control of their workplace retirement accounts by quarterly rebalancing. Receiving private, unbiased, fiduciary-based advice is possible and has never been easier.

Optimizing workplace retirement accounts is paramount if Americans want a better opportunity to enjoy a retirement full of choices, chasing dreams, and fantasy vacations. More money in retirement can create more fulfillment for all Americans. 

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