If you have an employer-provided 401k account but didn’t thoroughly review your options after making initial investment picks, you’re not alone. According to Forbes, more than 52 million American workers are currently enrolled in 401k plans. And these plan assets equal about $3.5 trillion, but how many employees ask third parties for an unbiased 401k review? Many employees probably enjoy monitoring their accounts and digging into details regarding fees quarterly or even annually. However, others likely haven’t thought much about these accounts since they first received their employee handbooks.
Four Reasons You Need An Unbiased 401k Review
It may be easier to set it and forget it when it comes to your 401k investments. But when it comes to your financial future, tuning things out isn’t the best way to secure a happy retirement. Here are four good to get an unbiased 401k review from a fee-based financial planner.
1. You don’t want high fees to cut into your earnings.
High fees (think: anything over 1%) can really add up over the years. Fortunately, since 2012, the Department of Labor requires all 401k providers to use a transparent, standardized approach for disclosing fees. This goes a long way toward helping employees understand exactly what they’re paying for. Passively managed funds generally have lower fees than actively managed ones. Further, larger employers often pay less in fees than small businesses do. Though a measly percentage point sounds like nothing, it’s a big deal. Paying just 1% more in fees can cost tens, even hundreds of thousands in retirement savings over your entire career.
An unbiased 401k review provides you with vital information about the fee structure you’ve agreed to for using that account. If the fees are too high, you can shift your investment plan to an IRA instead. But you’ll never know how to properly gauge your options unless you do a little digging first. An unbiased 401k review from an experienced financial advisor will help you make a more informed investment decision.
2. You want your plan to be diversified.
We’ve all heard the phrase, “don’t put all of your eggs in one basket.” It’s a ubiquitous maxim because it’s good advice — your retirement portfolio needs variety to reduce risk exposure. An unbiased 401k review from a fee-based financial planner tells you exactly what mixture of funds your plan’s invested in.
Since the guidelines aren’t strict regarding exactly how diversified a 401k fund must be, only you can determine if yours can meet your unique financial goals and retirement timeline.
3. You need to know how to make the most of employer matching, if applicable.
Many companies match employee 401k plan contributions up to a certain percentage. This is free money, so you need to know everything you possibly can about using this policy to your advantage. Even if your 401k plan isn’t exactly what you’d choose, it’s probably worth participating in if your employer matches contributions. An unbiased 401k review from a fee-based financial planner will help you maximize this important benefit.
4. You should talk through your financial goals for the future.
An unbiased 401k review helps you outline your retirement goals, and how to achieve them. Perhaps you want to contribute to both your 401k and an IRA. The earlier you devise a plan and the longer you stick to it, the easier it will be to retire on time and with adequate funds. Maintaining your current lifestyle in your later years depends on it.
Financial Experts Know How to Maximize Your Retirement Savings
A financial planner can help you see all possible options, and how they may complement each other. The IRS set higher contribution limits in 2015, so employees can put up to $18,000 annually into a 401k or Roth IRA. Employees over 50 can put an additional $6,000 in allowable “catch-up contributions” into their 401k or Roth IRA plans. It’s smart to speak to an expert, particularly if you have some catching up to do with your retirement savings.