According to Fidelity both 2021 401k’s and IRA balances are at all-time highs! This is great
news, despite the pandemic, economic challenges, and recent market turbulence, your 401(k) is
right now likely in the best shape it’s ever been in.
This IFW Minute is dedicated to how you can not only protect your 401(k) but grow it even more!
Let’s talk growth!
First if possible, use the Auto-escalation” tool that will increase what you save every year
incrementally so you don’t quite feel it. Don’t take anything by withdrawing or borrowing
(unless you absolutely must) before 50 ½ or retirement.
Second, If your not already taking advantage of the full company match, do it now. Contribute
as much as possible up to the match!
Now let’s talk growth & Protection!
The thing to keep in mind is we have been in a 9 year, 5 months, 13 day -year bull run with the
last 12 months seeing returns of 23.29%. None of us have a crystal ball but one thing we all
know is there are ups AND DOWNS!
So how can you address this! There is a little-known secret available in most 401(k)
plans called a self-directed brokerage account or SBDA. With the click of a button, you can
have the opportunity to gain full control of more investment options with the guidance of a
financial professional. And here’s the thing – your money stays right where it is with your plan.
A study by Vanguard showed working with an advisor can make a 3% difference in your
return. A 3% return difference over time will certainly compound and make a significant
difference to your future retirement income.
And when it comes to protection from those inevitable downs a financial advisor can also help
provide guidance on how to be best prepared with strategies like a volatility buffer. What’s
that? A volatility buffer is something that is not correlated to the market so it CAN’T and
WON’T go down. Some examples are products as simple as a money market, savings account,
or cash value life insurance.
The SDBA option is certainly worth exploring if your plan offers it to get that support and guidance to
help grow and importantly PROTECT you what you have worked so hard for.
BTW – having your own financial advisor will also have benefits to your other financial goals like
reducing taxes in retirement, protecting your family, and giving you more financial freedom to truly live
your very best life!