401K Fortitude

Let’s face it, the 401K or 403B equivalent for non-profits and government employees has become the most common way to save for retirement. The two largest assets for most Americans are their home and their 401K. So, what can you do to manage your 401K the best way possible?

Well, each 401K retirement plan is different but you do have several options.

Option 1 – Work with an Advisor. You can pay an advisor a fee for a financial plan to manage your 401K balance and asset allocation. This means your advisor would help you select a portfolio of mutual funds based on your risk tolerance and then they would review that every 3-6 months as you approach retirement. You can pay those fees out of pocket and deduct them on your tax return if you itemize.

Option 2- Self-Directed Brokerage Account. Many plans now offer a brokerage window or self-directed option that allows you to keep the money in the 401K plan, but you can move it into a self-managed account where a financial advisor can select from a larger universe of investments like mutual funds, ETF’s and potentially, individual stocks. Your contributions and match still go into the plan and you can still continue to work but now someone is professionally managing that with more investment options.

How do you know if you have a self-directed brokerage account? An easy way is to call HR and ask them or ask for materials on the plan. Those details are normally spelled out in the marketing literature of the plan. Or you can call the company listed on the quarterly statement you receive in the mail and ask them directly. If your 401K statement has Fidelity or Charles Schwab on the statement, it most likely has a self-directed brokerage window option on the plan.

Option 3 – In-Service Withdrawals. This is our personal favorite for several reasons. This allows you to continue working and still contribute and receive the match, which protects your ability to continue to save. What this also allows you to do is to roll your assets out of the plan once you meet the In-Service Withdrawal requirements. This allows you to set up a self-directed IRA with a financial advisor or on your own to manage your assets outside of the plan. We feel that it should be federally mandated for all plans to allow this provision as more and more of the burden falls on you for retirement. This allows you to invest in pretty much anything for your benefit.

If you complete a financial plan with an advisor and you determine you need more guaranteed income, you can execute an in-service withdrawal and move that money into a guaranteed income annuity prior to retirement to take advantage of time and guaranteed returns with an insurance product, to protect your future income needs.

As your 401K or retirement account balance grows and you near retirement, the options you have for planning and taking control of your assets outside of a retirement plan are more and more critical. Furthermore, taking large losses near retirement can push back your potential retirement date as it can take years to recoup those losses as some of you probably experienced in 2000-2003 and 2008-2009.

If you aren’t sure what options you have and want help, we do offer a free, 30-minute consultation to assist in these matters. Please contact us here to learn more about the options available to you.