You know the feeling. News report says the stock market just hit another all-time high. You look at your 401k balance. Meh. It’s a little higher, but you don’t get that “all-time high” kind of feeling.
Your office mate Jerry has been raving about the run his developing markets funds have been on this year, and you just can’t help but get the feeling you’re missing something.
2008 was a while ago, but it was BAD. Markets had a really good year in 2013, but you might have missed a lot of that because of changes you made after 2008-09. Since that time, it’s grown by a little bit. ‘2017 has been a good year,’ you think. ‘My statement says I’m up about 8.5% so far.’
You hear the radio news report say the US stock indexes have posted gains of 19% this year. ‘Good for them. Why not me?’
Determined not to let frustration set in, you resolve to take action. ‘I can fix this. I’ll get some help.’
You log into your plan’s online portal, look up the 1-year performance of your account and the fund fact sheets. They are about 50 days old now, dated the end of September. ‘What’s going on now?’, you think.
You call the plan provider’s toll-free number and ask to speak with a representative. They refer you to the fact sheets, the prospectus information, the online calculators. Not satisfied, you press them for analysis and direction. They refer you to your HR department and the local plan rep.
Door slammed. Maybe another one will open.
‘I’ve gotta get a better handle on this. There must be someone who can help me understand this,’ you think.
You send an email to HR, and they call you back. “It’s normal to feel like you need more pointed direction,” they say. “But, as the sponsor of the plan—your employer—I can’t give you any advice. Legally, we can’t do that. Only an investment advisor can do that.”
Another slammed door.
You send an email to the plan representative, who you met a couple times when they visit HR. You’re sure to CC: your HR department, to increase the likelihood of a response.
They write back. “I’d be happy to have a phone meeting with you to discuss your goals and your retirement timeline. We should make sure you’re contributing the right amount, that your asset allocation is right for your age, and that you are properly diversified. How does next week look for you?” They email you a “Risk Tolerance Questionnaire” to complete before the call.
‘Finally, we’re getting somewhere.’
On the call, you share your motivations about wanting to know what you should be invested in right now, since everything seems to be moving up faster than your account balance. The rep takes the results of your Questionnaire and then pauses to look at your current investments.
“You’re currently invested 100% in the Target Retirement 2040 fund, which is professionally managed to match the risk tolerance of someone whose retirement timeline is around the year 2040. Since your Risk Tolerance was 38 out of 50, maybe we could transfer about 20% of that balance to something with higher returns this year. Is that what you want to do?”
“Is that what I want to do? Can you tell me what I’m supposed to do? What I want is to retire at 62. What I need from you is advice on what to do now to get me there. I need help with that. Can you help me?”
“Are you asking me to tell you exactly what you should be invested in?”
“Yes, isn’t that what you do? My HR rep said they can’t give me investment advice. The plan provider’s customer service said I needed to talk with you if I was looking for more help than they could give me. So, I’m calling you.”
“I’m sorry, but legally I can’t tell you what you should be invested in. My role is to educate your company’s employees about the importance of saving for retirement, the tax benefits of a 401k, and to contribute enough to have a good retirement.”
“Well, is there someone else at your company I could talk to about the investment advice I need? I need to be much more informed and confident about what I’m doing. Who can help me?”
“The plan provider has a wealth management department that gives that kind of advice, but I don’t know if your employer has contracted for that. If they haven’t, then it would cost 0.75% of your account to have them manage it for you.”
Doing some quick math on your $100,000 account balance, you realize… “That’s $750 a year! Plus, since my account only grew 3% last year, wouldn’t I be giving up a big chunk of it to them, just so someone could tell me what to invest in?”
“I’m sorry to be the messenger here, but that’s the only way you can get advice on our plan. And, technically, they would manage the account for you, so any changes that needed to be made, they would make for you. It’s like set-it-and-forget-it. If that’s a level of service you’re interested in, I would contact your HR department. If they’ve built that into the plan, then it won’t cost any extra.”
A quick email back and forth with HR tells you it’s not part of the plan. Actual investment advice will cost extra…
… Does any of this sound familiar?
Here’s the good news. This exact scenario is why the 401k Toolkit was developed.
When you want to know:
- What to be invested in (real investment advice just for YOU)
- How much you should contribute
- When you can retire
The 401k Toolkit is for you.
The first step is to find your Comfort Zone. Investments go up and down, just like the stock market report you see and hear from time to time. But, not everything moves at the same time or at the same speed.
If you’re not happy with what you’ve seen in your 401k performance, or if you’re worried what might happen if the market crashes again, chances are pretty good that you are not investing in your Comfort Zone.
To find out how far outside your Comfort Zone your current investments are, click here.
Your Help — real advice — is here. Let’s get crackin’.