Can I Boost My 401(k) Savings without Contributing More? - 401k Maneuver

Can I Boost My 401(k) Savings without Contributing More?

Maxing out yearly 401(k) contribution limits is the best way to ensure investors boost 401(k) savings and have enough money to retire comfortably.

But, this isn’t always feasible.

Consistently contributing as much as you can and meeting the company match may also make a huge difference in your retirement lifestyle.

There is one thing you can do today that may potentially have a significant impact on your 401(k) savings: seeking third-party advice.

In the age of low-cost robo advisors and financial DIY tools you can access on your smartphone, many 401(k) investors overlook the importance and value of third-party expert advice.

Although you might have basic investment knowledge, utilizing an expert to make the moves that require skill and care may change the performance of your account from good to great.

And potentially boost retirement savings.

In fact, studies continue to show that working with a financial advisor may increase your 401(k) savings and greatly impact the type of retirement lifestyle you can afford.

3% Potential Higher Annual Return

401(k) Savings

From 2006 to 2012, Aon Hewitt and Financial Engines conducted a study where they compared the returns of investors who sought help in the form of online sources or managed accounts to those who managed their 401(k)s themselves. 

The study, which examined the 401(k) investing behavior of 723,000 workers at 14 large US employers, concluded that people who got professional help earned higher median annual returns than those who invested alone. 

In fact, “Participants who got Help received, on average, 3.32% (net of fees) more in return annually than those who managed their own portfolios

“If two participants—one using Help and one not using Help—both invest $10,000 at age 45, assuming both participants receive the median returns identified in the report, the Help participant could have 79 percent more wealth at age 65 ($58,700) than the Non-Help participant ($32,800).”²

In a 2019 study titled Advisor’s Alpha, The Vanguard Fund Group, Inc., also reported a 3% average increase in the value of portfolios of clients who work with a good financial advisor.³   

The study does point out that this return depends on the client’s situation and it will vary from year to year. 

“The majority of this increase will come during periods of heightened greed and fear in the markets when advisors can step in and help their clients maintain an even keel and keep their long-term objectives in sight.”⁴

Morningstar’s David Blanchet, Head of Retirement, CFP, CFA, published a 2014 study titled, The Impact of Expert Guidance on Participant Savings and Investment Behaviors.

401(k) Savings

401(k) Savings

Expert guidance provides investors with additional investment benefits and savings,  “such as increased savings levels and diversified investment allocation, which may lead to greater potential returns and more income in retirement, even after accounting for potential fees.”

Take a look below to see the potential of adding 3% more to your 401(k) over time. 

401(k) Savings

What impact would a potential 40% increase in 401(k) savings have on your retirement future? 

Would it mean you could travel more and not have to take on a part-time job or side hustle?

Would you be less worried about running out of money? 

Would you be able to spend more time with family and friends or pursuing hobbies and crossing off items on your bucket list? 

We’re betting the answer is yes

With 401(k) Maneuver, you can see the potential advantage of having professional account management to help manage your 401(k) account in the example below. 

401(k) Savings

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

Check out our retirement calculator to see how professional account management may improve your 401(k) account performance.

Third-Party Experts: More Than a Money Manager

401(k) Savings

One of the biggest reasons people’s 401(k) investments underperform in good or bad markets is due to human emotion. 

The fear of losing money should the market drop.

The sense of being powerless. 

The dread of retiring without adequate savings.

The anxiety over what happened in 2008, and the fear of something similar happening again. 

No one wants to lose money, but making investment decisions based on emotions may negatively impact your retirement savings

In addition to managing your investments, good financial advisors act as a behavioral coach

They help you wade through rough markets and make decisions based on data and trends, not fear and worry. 

With expert advice, you’ll make better financial decisions. And, thus, potentially earn more to boost 401(k) savings. 

Before you reach out for help, check out our guide on how to understand The Different Types of Licenses Financial Advisors Have and What They Mean to You.

If you have questions about your 401(k) or if you need help, we’re here for you. Click below to book a complimentary 15-minute 401(k) Strategy Session with one of our advisors. 

Book a 401(k) Strategy Session

Sources:

  1. https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
  2. https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
  3. https://www.investopedia.com/articles/personal-finance/102616/how-much-can-advisor-help-your-returns-how-about-3-worth.asp
  4. https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
  5. David Blanchet, Head of Retirement, CFP, CFA, Morningstar 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
  6. David Blanchet, Head of Retirement, CFP, CFA, Morningstar 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”

 

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401(k) Maneuver is another business name for Royal Fund Management, LLC a SEC Registered Investment Adviser.

The Suggested 401(k) Maneuvers data illustrated in the chart on this page is created using back testing. Back testing involves a hypothetical reconstruction, based on past market data, of what the performance of a particular account would have been had the adviser been managing the account using a particular investment strategy. Performance results presented do not represent actual trading using client assets, but were achieved through retroactive application of a strategy that was designed with the benefit of hindsight. Back tested performance results have inherent limitations, particularly the fact that these results do not represent actual trading and may not reflect the impact that material economic and market factors might have placed on the adviser's decision-making if the adviser were actually managing the client's money.

These results should not be viewed as indicative of the adviser's skill and do not reflect the performance results that were achieved by any particular client. During this period, the adviser was not providing advice using this strategy and clients' results may be materially different. The strategy that gave rise to these back tested performance results is one that the adviser is now using in managing clients' accounts.

A client’s actual performance could also be materially different as a specific defined contribution plan investment menu may not have the same or similar investment menu options utilized by the adviser during back testing. The limitations of a defined contribution plan’s investment menu could result in materially different performance results.

CAGR is defined as Compound Annual Growth Rate. The Riskalyze Number is a calculation used to define the risk of a portfolio or the risk tolerance of a client compared to market indices. It determines mathematically the potential range of profit or loss with a probability of 95%. There can be no assurance that the portfolio does not lose more than the projected loss of the range of outcomes calculated.

Returns do not reflect the performance of any advisory client and reflects the reinvestment of dividends and capital gains. No current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's investment portfolio. There are no assurances that a client's portfolio will match or outperform any particular benchmark.Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses.

Projections are based on assumptions that may not come to pass. There is no guarantee or assurance that the projected or simulated results will be achieved or sustained. Actual results may be better or worse than the simulated scenarios. Trend indicators can shift precipitously in response to global events.

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