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401K Financial Advice

401K Financial Advice

1. Consider Paying for Account Management

There are plenty of financial advisors who would love to manage your retirement account, providing you meet their minimum balance requirements. There are also online services that can help you make good financial choices even if your balance is small. Both options come at a price. However, AFG fees are in line in the industry and couple this with their attention to detail far exceeds any other Financial Planner in today’s marketplace.

A 2014 report published by the retirement investment firm Financial Engines, Inc., found that assets managed by professionals saw an average of 3.32% more in returns than accounts without professional management. It pays to have experienced and the expertise that AFG offer’s.

Interestingly, enough professional managers could charge a fee of nearly 3% or more in some cases—of an investor's total account balance. There are also online services that might charge less but you will not get the personal touch. AFG will always proved you with the personal touch that you deserve.

In general, if you have little investment knowledge, it is worth getting help from a professional you feel you can trust. AFG is a trusted source with a proven track record. Call us today! You will glad that you did.

2. Contribute the Max for the Match

If your company is matching your contributions up to a certain point, contribute as much as you can until they stop matching the funds. Regardless of the quality of your 401(k) investment options, your company is giving you free money to participate in the program. Never say no to free money.

Once you reach the maximum contribution for the match, you might consider contributing to an IRA to diversify your savings and have more investment choices. Just do not miss out on the match.

3. Learn the Basics of Investing

To evaluate different funds in your 401(k)—or to understand what your financial professional is saying—you need a basic knowledge of investing. It also helps to understand terms such as 12B- 1 fees, expense ratio, and risk tolerance.

Read through the information sent to you by your plan. If there are terms you don’t know, look them up.

4. Be Sure to Rebalance

Life is full of routine maintenance, and your 401(k) needs maintenance too. In the investment world, rebalancing is another term for maintenance. As different assets move up or down in value, they become a smaller or larger percentage of your overall portfolio.

Financial advisors suggest having a specific allocation of stocks and bonds. If you are 40 years old, for example, you might have 80% of your money in stocks and 20% in bonds. If that allocation gets out of balance, you may have to buy or sell assets.

5. Learn to Love the Index Fund

Some people love the appeal of stock picking. Finding the next Google or Tesla that will return hundreds of percentage points over a relatively short amount of time is thrilling, but according to research, the gamble generally does not work that well.

An index fund simply follows a market index. A fund that follows the S&P 500 rises and falls with that index. There is no guessing which stock will outperform the market, and the fees you pay for index funds are almost always much cheaper than those for funds that try to pick the next great stock. There is plenty of research that shows index funds outperform actively managed funds over the long term, too.

6. Be Wary of Target Date Funds

Think hard before you simply invest your 401(k) in a target-date fund. The idea of these funds is that they are geared to evolve as you move closer to retirement. If you are planning to retire in 2035, for example, you would invest in a target-date fund that matures in that year. The fund’s managers will continually re-balance the fund to maintain an appropriate allocation as the target date gets closer.

Here is why this type of fund may not be the best choice. For starters, funds use different allocation strategies, which may or may not be a good match with your goals. As experts point

out, a target date fund’s performance is largely based on the fund managers. Since you probably do not know the good managers from the bad, picking a fund is difficult.

Equally important, fees for these funds are often high, and novice investors do not understand the golden rule of target-date funds. If you invest in one, you should not mix it with other investments. Most financial advisors agree that it’s close to an all-or-nothing investment. Investing your 401(k) in other funds as well throws off the allocation.

7. Go Beyond Your 401(k)

Your 401(k) should be one of several retirement vehicles that you have. Your home, a side business, collectibles, and other investment accounts such as an IRA might also be part of your mix.