As a recruiter, I inform my PG&E clients, and occasionally those from Fortune 500, of the importance of reviewing their 401(k) plans and making any necessary adjustments. Let's go over some key things you need to understand when analyzing your 401(k) plan.
When was the last time you evaluated or made changes to your 401(k) account? If it has been some while, you are not alone. 73% of plan participants, including those at companies like PG&E and Fortune 500, spend fewer than five hours annually examining their 401(k) investment options, and the situation is significantly worse when it comes to account modifications.
When confronted with a problem or challenge, many of us are wired to attempt to solve it on our own rather than seek assistance. The Christmas Eve tradition of putting together gifts without reading the instructions and the road trip during which we refused to seek for directions come to mind. But when it comes to 401(k) investments, going it alone rather than seeking assistance can be quite detrimental.
Nearly fifty percent of plan participants acknowledge they lack the time, desire, and/or expertise to manage their 401(k) portfolio. This is a common sentiment among employees at various companies, including those at Fortune 500. But, the benefits of assistance extend beyond convenience. According to research from Charles Schwab, plan participants who receive assistance with their investments tend to have better-performing portfolios. The net annual performance disparity between those who receive assistance and those who do not is 3.32%. Contacting an advisor at age 45 might result in a 79% increase in wealth by age 65 for a participant. That's a significant difference.
Receiving assistance can be the key to improved 401(k) performance across the board. A study by Charles Schwab uncovered a number of favorable results shared by people who utilize independent professional counsel. They consist of:
70 percent of individuals who utilized 401(k) advice boosted their contributions. Increased diversity — Participants who managed their own portfolios invested in an average of just under four asset classes, whereas participants who received help invested in at least eight asset classes.
Greater likelihood of perseverance – Receiving assistance enhanced the likelihood of participants adhering to their investing objectives, making them less reactive during turbulent market conditions and more likely to maintain their original 401(k) investments after a market decline. Don't attempt to complete the task on your own.
Obtain assistance with your 401(k) investments. Your nest egg will be grateful.
If you are still puzzled or have additional concerns about your 401(k) plan, you can contact your company's human resources department. This advice is particularly relevant for employees at large companies, such as those at Fortune 500, where navigating benefits can sometimes seem daunting.
Sources:
The Retirement Group or www.theretirementgroup.com
“Retirement Plans-Benefits & Savings.” U.S. Department of Labor, 2019, www.dol.gov/general/topic/retirement.
“Generating Income That Will Last throughout Retirement.” Fidelity, 22 Jan. 2019, www.fidelity.com/viewpoints/retirement/income-that-can-last-lifetime.