Most people haven’t taken an undergraduate class on investing, much less 401k investing. When the 401k was introduced it had a limited number of choices. Then, due in part to technological advances, the number of choices began to balloon. I have seen one plan that had 150 choices. Given that the plan is for busy attorneys, I doubt that they have much time to evaluate these choices. What does evaluating choices even mean?
Does your employer know more than you about 401k investing?
While you hope so, that may not be the case. As an Accredited Investment Fiduciary, I have specific education on all the aspects of running a retirement plan. I have yet to come across a company official who had that type of background. For the first time, I had a company who sought me out becase I had that credential!
There overall responsibility is to create a plan based on responsible costs and choices. While the choices individually may be good, they don’t have be right for you. They don’t even all have to play well together in a portfolio. That is on you, unless you opt for staying in the default choice.
401k investing default choices
Does the default have you in mind? Many plans have a default choice. Some of the defaults are in a cash type of investment. Others have something called a qualified default investment alternative. That choice could be ones referred to as balanced, risk-based or target date. No matter the choice, they each have a mix of different types of investments such as bonds, stocks and cash. However, an x-ray is required to know what percentage is included in each. In addition, what specific types of investments are inside of the allocation? Are they proprietary or non-proprietary? Should you care?
401k investing and systematic saving
Many people think investing is a strategy of finding the right investment and getting in and out of it at the right time. This speculative strategy is very difficult to get right. In fact, there is no research I am aware of that shows it to be successful. 401k investing has as a backbone, systematic savings approach known as dollar cost averaging. In this strategy, your paycheck contributions continue no matter whether the individual price of your investments has gone up or down.
Let’s use an example with buying kiwis at the market. Sometimes they sell 1 for a $1. At other times, they sell 4 for a $1. Rather than say what’s wrong with these, kiwi lovers tend to buy more. In this case, they say kiwis are “in season”. If we had $1 + $1 and divide by 1 +4 kiwis, your dollar cost average price is $0.40. In investing, it is impossible to know what the future price will be. By continuing to buy in all conditions, we benefit.
However, it is important to discover what fruits, investments are right for you so that you will stick your investments and investment strategy. Does your individual strategy complement the systematic investing of your 401k plan?
One-size-fits-some or customized 401k investing advice
Unfortunately, your 401k plan may be oversimplified to meet the needs of the many. However, the purpose of this plan and your 401k investing is to help you fund a comfortable retirement. Why not get help focused on understanding your specific needs and your situation?
Envision Wealth Planning will provide customized 401k investing investment advice to fit your unique situation. Whether you are just getting started or are nearing retirement, we can help. We will help you create a thoughtful strategy that brings your personal vision of financial independence into focus.
Everyone has a different idea of financial freedom—you may envision walking along your quiet lakefront home, travelling the world or something uniquely yours. We can help you evaluate your goals and create a 401k investing strategy based on your current financial situation, investment philosophy and timeline.
Our customized 401k investing service
Through our 401k investing service we will
- Help you clearly and accurately define your 401k investing investment objectives.
- Obtain current information from you to ensure that our recommendations are an accurate reflection of your needs and goals.
- Provide recommendations only with respect to the investment options available under your current 401k.
- Deliver written asset allocation and/or specific investment recommendations for your 401k assets held at a custodian other than Envision Wealth Planning. It is up to you to decide whether to implement our recommendations.
Moreover, we recommend discussing this with your tax advisor. This service may be tax deductible as we charge you a flat investment advisory fee.
Addressing your retirement needs may seem daunting, but we can work with you to establish a strategic direction and guide you toward your goals. Contact us to schedule an introductory call today to start gaining the knowledge and insight you need to plan for retirement.
