Is Professional 401(k) Account Management Really Worth It?

401(k) account management is an option for anyone with a 401(k) – no matter how close or far you are from retirement.

Even if you have some basic investment knowledge, you might want to consider seeking expert advice.

Think of it this way – financial advisors manage 401(k) accounts for a living. It’s their job. 

It’s not something they do when they have time, which is often what individuals who self-manage their 401(k) accounts tend to do.

However, not all professional 401(k) account management companies are created equal. 

In this post, we hope to clarify the types and show how having someone manage your 401(k) may help you have more money during retirement.

Professional 401(k) Account Management Should Be Personalized

With the rise of AI and the IoT, we are seeing more robo financial advisors popping up.

Robo advisor managed accounts mean an investment service selects a group of funds and packages them in an investment portfolio for you. 

There is little personalization. Many only rebalance annually, and personal risk tolerance is rarely considered.

In contrast, a personalized, professional managed account means your 401(k) is personally managed by a person or team – not a robot.

Personalization occurs using the investment options that are offered, and a personalized strategy – tailored to your unique situation and risk tolerance – is designed using the full menu of investment options in your 401(k) plan. 

When you have professionals personally managing your 401(k), like we do at 401(k) Maneuver, the focus is on the outcome, not a one-size-fits-all algorithm based on your retirement date.

That’s why looking for 401(k) account management done by real people is so important.

At 401(k) Maneuver, we are a fiduciary, which means we are obligated to act in your best interest to improve your account performance. You aren’t merely a number in a computer program.

The Benefits of Professional 401(k) Account Management

Some people ask, “Why invest in professional 401(k) account management when you can do it yourself?”

There are many reasons why. 

Professional 401(k) account management may help you stay on course to meet your retirement goals and lead to a brighter retirement future. 

Here’s how…

#1 Keep More Money

Professional 401(k) management help has been shown to lead to less dispersion (due to fewer risks).

Vanguard’s How America Saves 2024 Report states, “Participants with managed allocations—notably target-date funds and managed account advisory services—had less dispersion in outcomes. […] For managed account participants, the 5th-to-95th percentile differences were 5.4 percentage points. […] By comparison, among all other participants, realized returns for those making their own choices ranged from 2.1% per year for the 5th percentile to 14.7% for the 95th percentile, a difference of 12.6 percentage points.”¹

In addition, those with managed accounts tend to save more money in the first place.

Edelman Financial Engines released a 20-year report analyzing the trends in managed accounts.

One finding was that “managed accounts tend to lead to more positive savings behaviors. Today, managed account members are contributing an average of 9.1% of their income to their account, compared to 7.8% for non-members and 7.4% for individuals primarily invested in a single target-date fund.”²

#2 Personalized Approach

Professional 401(k) account management helps provide a customized and personalized savings strategy for retirement.

Saving for retirement is not one-size-fits-all. 

This is why the Edelman Financial Engines 2024 Igniting Growth Through Innovation report found, “The percentage of managed account members taking advantage of adding personal data and preferences has grown significantly in the past decade, from 33% in 2014 to 74% in 2023.”³

You are unique. Your risk tolerance and retirement goals are personal.

401(k) account management by real people understands this is the case, which is why so many people are moving away from DIY investing and robo investing to managed accounts.

#3 Reduce Fees

Fees hidden within your 401(k) may take away from your investment returns and leave you with less money in retirement than you planned. 

Yet, 92% of 401(k) investors have no idea what they are paying in fees.⁴

Personalized professional 401(k) account management helps you identify the fees inside your 401(k) and know if you’re paying too much.

#4 Save Time and Ease Stress

A set-it-and-forget-it approach to retirement savings most likely won’t get you to your goals. 

Managing a 401(k) takes time and action, but not everyone knows how or has the time to do so.

If you don’t have the time to learn how to manage a 401(k) account effectively, professional account management can help. 

Passing the time-consuming task of managing your 401(k) to the professionals will allow you to focus on other things in your life, knowing your account is taken care of. 

You won’t have to worry about rough markets, data, or trends because you’ll have someone there to guide you.

With professional advice, you are more likely to make better financial decisions. And, thus, potentially earn more to boost retirement savings.

Professional 401(k) account management may alleviate stress.

According to Edelman Financial Engines 2024 Igniting Growth Through Innovation report, “94% of managed account members are more confident that they’ll reach their retirement goals because they’re enrolled in the program.”⁵

At the same time, over half of Americans believe we are facing a retirement crisis.

Wouldn’t you rather be one of the Americans who feel confident they’ll reach their retirement goals than those who fear running out of money?

#5 Protect Your Retirement

401(k) Maneuver provides professional account management to help you grow and protect your 401(k) account. 

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that may harm your account performance. 

Our done-for-you virtual service lets you keep your 401(k) right where it is while we review and rebalance your account based on your risk tolerance and current market conditions.

Have questions or concerns about your 401(k) performance? Book a complimentary 15-minute 401(k) strategy session with one of our advisors.

Book a Call

Sources

1. https://institutional.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2024/has/how_america_saves_report_2024.pdf
2. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf
3. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf
4. Over 90% of Americans make the 401(k) Mistake, Maurie Backman, Motley Fool
5. https://assets.foleon.com/eu-central-1/de-uploads-7e3kk3/49240/2024_20_years_managed_accounts_report_final.f65d5278bee2.pdf

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