Watch and Listen Or Read Below.
The #1 Problem with Your 401k (and by the way, it’s probably not your fault).
Can you answer these questions about your 401k?
- What is my average annual return for the past 1, 3, 5, and 10 years?
- What is the real amount of risk I am taking with my money?
- Do I invest in Mutual Funds, ETFs or Target Date Funds?
- 4. Who decides on how to invest the money?
- 5. Am I 100% certain I’m doing the best that I can with the resources that I have?
Real easy, right???
NOT!
Every week I speak to individuals, families and small businesses about retirement planning and their investments. The real problem that I see is that these individuals feel they are not sure about the risk they are taking in their investment accounts or even how to pick the investments according to their values, goals, risk tolerance and time horizon.
The problem is lack of guidance, lack of communication, lack of education and those vague risk-tolerance questionnaires that all to often do not work!
And these questionnaires don’t advise as to what vehicles to consider using like an ETF over a Mutual Fund or those Target Date Funds that all too often don’t work for most investors either. (That’s another post coming).
Ok, I guess that’s more than 1 problem here.
Have you ever taken one of those vague risk tolerance questionnaires that seems to generate the same results to everyone? The questionnaire are all too often NOT personal to you or your investment amounts.
And guess what happened in 2008 when all of those investors thought they were a “Moderate Investor” or “Conservative” investor based on those risk tolerance questionnaires? Many of them lost 30%, 40% and even 50% of their retirement nest egg and some were forced to go back to work.
Now what has changed since then? Has the industry changed to help investors? No. Has the average retail advisor changed? No. So how can you make sure that your retirement plan isn’t on the same path if and when the next market crash happens?
Would you like to change your path?
Would you like to have all of those questions answered from the beginning of this post?
Here are 5 quick ways “employees” can potentially help themselves make better investment decisions and not make some of the same mistakes of the past. (Especially if their firm doesn’t offer these benefits.)
- Consider working with a fee-only financial advisor who has a fiduciary duty to keep your best interests first. This advisor should embrace technology and should understand that the old system with risk tolerance questionnaires do NOT work for everyone.
- Have that advisor review the options in your 401k plan and see what type of investments are available and have them explain the pros and cons of these investments.
- Capture Your Risk Number – take an enhanced, personalized risk tolerance questionnaire that covers topics such as your portfolio size, your top financial goals, and what you’re willing to risk for potential gains. Then the advisor can help to pinpoint your exact “Risk Number” to guide their decision-making process for your investments.
- Align Your Portfolio – After your Risk Number has been established, the advisor can begin to craft a portfolio that is designed to align with your personal preferences and priorities, helping you to feel comfortable with the portfolio’s expected outcomes and risk.
- Finally, ask the advisor how they plan to monitor your assets moving forward? If you don’t receive a robust answer or they just use buzz words like “asset allocation”, then it may be time to seek out a different financial advisor who utilizes technology to help keep your portfolio aligned with your preferences and goals.
For the employer/CFO/HR Departments:
Your firm probably offers a retirement plan like a 401(k) to your employees, but what about a comprehensive retirement readiness plan to make sure they are on the right path toward retirement? According to NAPA, National Association of Plan Advisors, helping employees with retirement readiness is one of the most important concerns employees stress about. In our work, we find that employees lack the education, information, technology, and tools to help them reach their retirement savings goals. That’s where we come in. We partner with your CFO and HR team to support their efforts along with empowering your employees through education and their overall financial wellbeing. If you’re interested in speaking with our firm so you can help your employees have peace of mind, create loyalty and be more productive please let us know. Thank you for your time. Scott Krase, President, CrossPoint Wealth
Until next time-
P.S. If you or firm are interested in speaking to us about our educational programs for employees, our speaker series, and our retirement readiness programs please us know here https://go.oncehub.com/crosspointwealth
Investment advisory services offered through RCM Wealth Management, an SEC Registered Investment Adviser. SEC registration does not imply any level of skill or training.
