Should I Pay Someone To Manage My 401(k)?

Most Americans biggest retirement asset is their employer sponsored retirement plan. Given that most people rely on that 401(k) or 403(b) to save for retirement, it is natural to wonder: Should I pay someone to manage my 401(k)?

See these situations where having a financial advisor manage your 401(k) may make sense for you.

Do you have the time? People have very hectic schedules.  Often, they tend to ignore their 401(k) plan.  Not paying attention to your 401(k), especially during times of market volatility, can have a large impact on the growth or losses in the account.
Do you have the knowledge? The good news is that most employer sponsored plans have limited investment choices.  However, even with these limited choices people often do not understand the differences between the available options.
Can you adjust for new market conditions? Markets are constantly changing – that means there are times you should be more aggressive and times you should take a more conservative approach. Not paying attention can impact your portfolio heavily.
Most people are left to “fend for themselves” when it comes to 401(k) management. Because of the lack of advice, what happens is a lot is people will either blindly choose funds and hope for the best or ask their co-workers what they should do. But, this isn't necessarily wise.
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- Jason Stelter

President of Triple Crown Wealth Management

Five reasons to have a financial advisor manage your investment accounts.

Looking at each investment account as a stand-alone account isn’t the most efficient way to manage money. Rather than every account having its own complete allocation, a portfolio-based approach focused on achieving an asset mix where all accounts are combined is ideal. A financial advisor can help you select the best investment options within a limited 401(k) plan menu. If your 401(k) offers a brokerage window, you may not be limited by the fund lineup at all. A financial advisor can review the options to help ensure you’re utilizing the plan’s features.

Most Americans just blindly put money into an employer sponsored plan and hope it works for them. However, many people do not have the time or knowledge it takes to effectively manage their 401(k).  The minimal cost of a financial advisor can have a huge impact on your future retirement income and plans.

Having an advisor review your entire financial situation and accounts means they can provide more detailed, comprehensive advice. Proper financial planning, including management of your 401(k), means your advisor will have a better sense of where you stand financially, and can give better advice.

While Google is a powerful tool at your disposal, there’s simply no substitute for a real person giving personalized financial advice. This advice is helping you make the correct allocations in your 401(k) for your risk profile, age, and market conditions.  However, these allocations need to be rebalanced on a regular basis due to life changes and market conditions, and this is where having professional advice comes in handy. 

Using professionally managed 401(k) services can also help reduce the risk of paperwork errors. Such as leaving blank beneficiary designations. It also helps ensure you are up to date with IRS funding limits or regulations.

-Kiplinger article discussing options you may have within your employee 401(k) system

How much does it cost to have an advisor manage my 401(k)?

Compensation methods vary between advisors and retirement plans. On average, it costs 1% annually to have professional advice. Fees are calculated on a percentage of asset under management. But, how much it costs to work with an advisor depends on the size of your accounts primarily.  While cost is an important component, the cheapest option today can be the most expensive in the long run.

Jason Stelter is an independent advisor, and isn’t employed by or affiliated with a fund company, and focuses on directing clients with objective advice. Jason Stelter is also is a fiduciary, committed to putting clients interests first.

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