When you look around at your co-workers, know this: Some of them earn more than you do in their 401k, and some earn less. Can you tell who’s who? Maybe you can. Maybe they don’t want to tell you their secrets. (Maybe you only hear them brag when they have a good day.)
What if you could grow your 401k to be $100,000 more than your co-workers’ before you retire? You can do it. There’s certainly some “inside baseball” you’ll have to learn first, though. If you want to know, I’ll teach you, so keep reading.
“401k speak” is like another language. Looking at all the graphs and charts, with the obscure performance metrics can be dizzying. And picking the investment options yourself can feel like buying lottery tickets–in the end, you put money in, but don’t get back much of anything.
Most people will naturally want to call the service provider, like Fidelity, Schwab, T. Rowe, Vanguard, etc., to get some help. When you tell them you want to talk about which investments you should choose, they’ll likely refer you to a plan consultant or transfer you to a call center “advisor”. This consultant will probably ask you to complete a risk questionnaire. At the end, they will tell you to “look at” either a target date fund (like ‘Retirement 2050’), a lifestyle fund (like ‘Growth & Income’ or ‘Moderate’), or some mix of 4-5 funds that include a mix of stocks, bonds, and cash.
Blah, whatever. Let’s get down to the nitty-gritty.
When you ask them which ones you should have, and what percentages, to achieve your goals, you might get a stunned silence. When you ask them why these are the best funds for you, you’ll hear crickets. When you ask what the likelihood of achieving your success is by using these funds, they won’t have an answer.
If they are completely honest with you, they will tell you that you are asking for investment advice, and they can’t give it to you.
My question to you is, “Why should you listen to someone who isn’t going to give you qualified advice and prove anything to you?”
Let’s think of this another way…
Suppose you’re going to take a weekend trip to a new beach, somewhere you’ve never been before. You arrange a place to stay on VRBO and you’re off in the car. You put the destination address in the GPS, and you’re off. The sun is out bright, so you set the climate control to 71 to keep you cool. Along the way, the GPS alerts you to an alternate route to avoid a 30-minute delay caused by an accident. You decide to re-route and only lose 3 minutes. (Good thing you had the GPS.)
Then, a monstrous thunderstorm develops, the air outside drops 25 degrees, and it starts pouring buckets. You put on the wipers and switch the A/C to blow on the windshield so the hot glass doesn’t fog up. (Good thing you have a climate control system.)
After a bit, the weather clears and you’re back to sunny skies and hot temperatures. You reach your destination only behind your ETA by 3 minutes.
Where am I going with this? I’ll tell you.
Would you even consider taking a trip to an unknown place without a GPS? To not use one would potentially make you waste hours in congested traffic because of an accident or a rush hour pattern that you didn’t know how to get around. (That’s like taking investment guidance from someone who can’t give you a reason why their way will work better than another way.)
Would you even consider taking a trip in a car AT ALL without a climate control system? To not use one would potentially make you either stop during the rain storm (and lose time), make you lower the windows to avoid fogging up the glass (and get you and your interior soaked), and make you sweat through the heat when it’s hot out. Who needs that?
Here’s where I’m going with this… Did you know you can use a GPS to guide your 401k? Did you know it projects future outcomes with 95% mathematical certainty? Did you know you can also use climate control on your 401k to keep you comfortable when the weather gets nasty?
I’ve used this kind of technology with my brokerage IRA clients for two years. In October 2017, I discovered a way to connect it with 401k accounts, and now I can help your 401k reach retirement better.
Here’s proof of how it works:
From 2006 to 2012, 723,000 401k participants’ accounts were tracked in a study by Aon Hewitt and Financial Engines. About 34% used advisory help to manage their investments for them, and the other 65% did not. Those who used the help earned a median +3.32% more per year, net of fees, over the group using no help.
Let’s say you and your work buddy both have $18,000 saved in your 401k. Including the company match, you both are contributing $300 per month. If you knew how to use this help, and your co-worker didn’t, then over a 25 year period, the difference would be over $100,000. If you’re under 40 and have more than 25 years until retirement, the numbers are even better for you.
(To calculate the difference this could make for your situation, use this calculator.)
My friend, it’s 2018, not 1998. You can and SHOULD use a GPS to guide your 401k. You can and SHOULD use a climate control system to keep you comfortable, no matter what the markets are doing (rain or shine).
Not doing this is like scratching off lottery tickets, hoping something pays off. (Good luck with that.)