5 Mistakes 401(k) Investors Make When Seeking Third-Party Advice

As a 401(k) investor, it’s all too easy to contribute each paycheck and never seek expert guidance on how to grow your retirement savings. Keep reading for the top 5 mistakes 401(k) investors make when seeking third-party advice.

#1 Assuming Your Employer Is Managing Your 401(k)

Even though your 401(k) is employer-sponsored, it does not mean your employer is managing or making changes on your behalf.

They aren’t. And they can’t.

It’s your account. It’s your money. And it’s your job to look out for your future.

If you’ve set up a 401(k) with your employer and haven’t made any changes at all, this may be doing more harm than good to your account balance. Because contrary to what some investors believe, a 401(k) plan is not a “set it and forget it” program.

mistakes 401(k) investors make
It’s just like driving cross-country. If there is a roadblock or other obstacle preventing you from reaching your destination, you need to make the appropriate changes in order to stay on course.

If there’s a change in tax or trade policy, market volatility, or a great investment is now not doing so well…you may need expert guidance to help you make the best decisions possible.

If you’ve set up a 401(k) or other workplace retirement plan and you aren’t regularly making changes because you think your employer or plan representative is doing it for you, chances are you may not reach your retirement goals.

Or worse, you may not even come close.  

Morningstar conducted a study that monitored the top 100 best-performing mutual funds between January 1, 1998, and December 31, 2013.¹

This study revealed that, in any given year of top best-performing 100 mutual funds in any of those years, in the next year, about half of the time, 8 out of 100 remained in the top 100 the very next year!

If you have a 401(k) and haven’t made changes in a while, it’s time to talk to a third-party professional.

#2 Thinking You Are Too Close to Retirement or Not Close Enough

man thinking about something
If you’re in your 50s or 60s, and are…

  • Behind on your retirement savings
  • Unsure if any move you make will make a difference at this point
  • Ready to give up

..now is the time to reach out for expert advice.

As you approach retirement, an expert may be better able to help you avoid losing what you’ve worked so hard to grow.

Do you remember 2008? What if you were set to retire in 2009? Would that have delayed or severely hurt your retirement? An expert might have helped to avoid the catastrophic loss many experienced in 2008.

It’s never too late to seek third-party advice. Because with expert planning and determination, it may still be possible to enjoy a comfortable retirement.

On the flip side, just because you have decades until you retire doesn’t mean it’s not beneficial to seek thirty-party advice now.

In fact, doing so sooner rather than later may have a significant impact on your retirement lifestyle.

#3 Thinking You Need More Money Saved

Another mistake 401(k) investors make when seeking third-party advice is thinking they can’t get professional help for retirement because they don’t have enough money saved.

The truth is, it doesn’t matter how much you have–even if it’s as little as $10,000. Your current account balance should not affect your thinking.  

Never devalue what you have because, to you, it might be everything.

A recent Morningstar report showed that participants who received expert guidance had as much as 40% more income during retirement versus those who received no help at all.²

Think about the difference a potential 40% increase in your retirement income might do for your retirement.

It could make a difference between taking staycations or luxury vacations. Or being able to spend time with grandkids instead of having to take a part-time job.

mistakes 401(k) investors make

With a potential 40% increase in income at retirement, would you be less anxious about running out of money and having to work longer just to make ends meet?

Would you sleep better at night knowing you have enough rather than guessing and hoping?

Chances are, the answer is yes.

So, if your low account balance has kept you from seeking third-party advice, we recommend getting help now.
> Click here to understand the different types of financial advisor licenses and how they may affect the advice you get.

#4 Not Asking Questions or Knowing What Questions to Ask

Sadly, our industry has done a good job of making things more complicated than they need to be. This has led many people to believe it’s difficult to be a savvy investor.

Many people we speak with are afraid to ask questions because they feel ignorant about their retirement investments. Some don’t know what to ask, so they stay silent.

Others are intimidated because they think they should know more than they do or they don’t understand industry jargon.

So, they avoid asking questions of their plan representatives, or reaching out for third-party help.

If you receive statements and don’t understand why you’re getting what you get or why you’re enrolled in a specific fund, you need to start asking questions.

After all, this is your retirement lifestyle we’re talking about. It’s your hard-earned money.

mistakes 401(k) investors make
Do what you can to educate yourself. Read our blog articles for retirement tips and savings strategies, and search online for related articles. Go to local seminars or attend webinars on the topic.

#5 Letting Fear of Making Changes Stop You

Many investors are driven by news cycles and, as a result, are afraid to make changes to their 401(k) or workplace retirement accounts.

Often, they just don’t know what changes to make and fear making a mistake that will hurt financially.

Instead of taking action, they do nothing.

Successful 401(k) investors know that it’s important to rebalance their account allocations every quarter.

They know that unmanaged allocations may experience much larger losses in down markets and may miss the opportunity for growth during good markets.

If you aren’t reaching out for third-party advice on how to regularly make changes to your 401(k), you may be missing out on earning more and keeping more of your hard-earned retirement savings.

If you’d like more tips on how to have more income at retirement, download our guide on How to Supercharge Your 401(k) Performance Today.

mistakes 401(k) investors make

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  1. Morningstar, 2013
  2. David Blanchet, Morningstar Analyst 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”


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