How to Understand 401(k) Options

Navigating your 401k isn't just about ticking boxes. It's a strategic play in securing your future comfort. Let's dive into some real talk about those 401k moves that could be slipping through the cracks: 1. Beyond the Employer Match: → Just meeting the match? You might be shortchanging your golden years. → Think bigger. Max out if you can. It's about compounding your security, not just meeting the minimum. 2. Catch-Up Isn't a Condiment: → Over 50? Supercharge that retirement savings. → These extra contributions? They're a boost to a cushier retirement. 3. The Job Hop Trap: → Swapping jobs? Resist the urge to cash out. → Penalties and taxes aren't part of the dream. Roll it over, keep it growing. 4. Costs That Creep: → Those sneaky fees can nibble away at your nest egg. → Get clear on the costs. Your future self will thank you. 5. DIY to Advisor: → Overwhelmed by options? A pro might be your play. → Tailored advice can turn a good plan into a great one. 6. Resist the Raid: → Thinking of dipping into that 401k? Pause. Reflect. → It's meant for future you. Protect it like a treasure. It's not just about setting up a 401k; it's about making it work as hard as you do. And while we're talking truths, remember this: Your 401k is more than a line item on your paycheck. It's the seed of your future freedom. Cultivate it with care. So, what's your next move to power up your 401k strategy?

As a Retail Leader, your 401K is a great benefit. To maximize it, here are 5 things to watch out for: 𝟭. 𝗡𝗼𝘁 𝘀𝗲𝗹𝗲𝗰𝘁𝗶𝗻𝗴 𝗮𝗽𝗽𝗿𝗼𝗽𝗿𝗶𝗮𝘁𝗲 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁𝘀. I had a client who was in the Stable Fund for 11 years. That's a cash-like investment, not even keeping up with inflation. It was not appropriate for her situation. It cost her $70k in lost earnings because she was in that fund. More when you consider the potential future gains of that $70k. 𝟮. 𝗨𝘀𝗶𝗻𝗴 𝗧𝗮𝗿𝗴𝗲𝘁 𝗗𝗮𝘁𝗲 𝗙𝘂𝗻𝗱𝘀 (𝗧𝗗𝗙) 𝘄𝗶𝘁𝗵𝗼𝘂𝘁 𝗶𝗻𝘁𝗲𝗻𝘁𝗶𝗼𝗻. TDFs can be too conservative, especially if you have 10+ years until retirement. That can cause lower returns for your situation. TDFs are made to cater to everyone, but your unique situation. Usually better if you custom select your investments, if available. 𝟯. 𝗡𝗼𝘁 𝗽𝗮𝘆𝗶𝗻𝗴 𝗮𝘁𝘁𝗲𝗻𝘁𝗶𝗼𝗻 𝘁𝗼 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 𝗥𝗮𝘁𝗶𝗼𝘀. Fees add up to many thousands over your lifetime. Don't pay more than you should. It is something you can control. Some funds can easily cost 10x more than a comparable fund within your 401K. 𝟰. 𝗨𝘀𝗶𝗻𝗴 𝗮 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝘀𝗲𝗿𝘃𝗶𝗰𝗲 𝘄𝗶𝘁𝗵𝗶𝗻 𝘆𝗼𝘂𝗿 𝟰𝟬𝟭𝗞. More often than not, such services put too much of your money in cash and conservative investments. A recent review for someone in their mid-30s showed 15% allocated in such conservative investments. For their situation, it made no sense. Some of these services also charge a fee, and that's in addition to the expense ratios mentioned above. 𝟱. 𝗡𝗼𝘁 𝘂𝘀𝗶𝗻𝗴 𝘁𝗵𝗲 𝗮𝗽𝗽𝗿𝗼𝗽𝗿𝗶𝗮𝘁𝗲 𝟰𝟬𝟭𝗞 𝗳𝗼𝗿 𝘆𝗼𝘂𝗿 𝘀𝗶𝘁𝘂𝗮𝘁𝗶𝗼𝗻. ▪ Traditional 401K - no tax now, but pay tax later. ▪ Roth 401K - tax now, but no tax later. Analyze your current and future tax situation. That will help you decide which 401K is more appropriate. Review and adjust as your situation changes. --- Use the 401K to its full potential. The above 5 are items you can control. Take the time to review on a regular basis. And if you are offered a 401K match, take it! It is part of your overall compensation. If you need help reviewing your 401K, reach out. My DMs are open. #retail #retailing #knowyourkoyns #financialadvisor Past performance does not guarantee future results. For informational purposes only. Consult with your advisor.

During annual reviews and meetings with new prospective families, I have been reviewing a plethora of 401k plans and documents. I wanted to share my 4 BIG takeaways and provide potential real-life next steps for you to consider. ☑ Don’t Save Too Fast In almost every other area of life, saving and investing more is encouraged. With an employer-sponsored retirement plan, that is not always the case. In many plans, you only get your employer match during the period you make contributions. In other words, if you max out your plan before the final paycheck of the calendar year, you could be forfeiting a portion of the employer match. You must understand your employer's plan. Fortunately, every plan must make a plan document available to you upon request. Your plan provider can provide a wealth of insight with a simple phone call. ☑ Beneficiary Designations While this one might seem obvious, mistakes happen way too often. Find the beneficiary tab of your employer plan online and confirm you have the correct beneficiaries. Common mistakes: parent instead of a spouse, ex-spouse, minor children ☑ Breaking Up with Your Target Date Fund For most employer-sponsored retirement plans, your investment contributions go to a target date fund by default. This is based on the year that you turn 65. For example, if you were born in 1980, your default investment option might be the ABC Target Date 2045 Fund. I do not think a person’s age should determine how their investments should be allocated. On average, I see that the average expense ratio in large employer plans is generally 0.40 to 0.45%. Inside the TDF, the fund allocates the funds to a combination of U.S. and International Stocks, Bonds, and cash. If you have a written financial plan, it should detail the investment asset allocation to help you optimally pursue funding your dreams. This could often be achieved by selecting 3-5 index funds without your 401k lineup. I see that passive index funds have an average expense ratio of 0.05%. ☑ Rebalance and Redirect When changing from target-date funds to your own mix of index funds, there are essentially 3 critical steps. First, you need to rebalance your existing holdings to the desired mix. Second, you need to re-direct future contributions to the desired mix. Finally, you need to select a date to do an annual rebalance. Hopefully, the plan provider will have an option for you to select to make this happen automatically. ★ Conclusion In a recent Vanguard study, Vanguard attempted to quantify the value of advice. They suggest that financial planners can add .45% of value by recommending low-cost index options and .35% for rebalancing. Hopefully, by reading this post, you improved your lifetime annual returns by 0.80% per year. Cheers, Nic #National401kDay