One Simple Way to Boost Retirement Savings without Contributing More
Funding the maximum contribution to your 401(k) or IRA isn’t the only way to boost retirement savings.
Yes, consistently contributing as much as you can–and starting as early as possible–makes a huge difference in your retirement lifestyle.
However, there’s one simple thing that may potentially have a significant impact on your retirement savings…
Seeking third-party advice.
In the age of low-cost robo advisors and financial DIY tools you can access on your smartphone, many people 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 retirement income and greatly impact the type of retirement lifestyle you can afford.
3% 7 Potential Higher Annual Return: The Data
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.¹
“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% 7 average increase in the value of portfolios of clients who work with a good financial advisor.³
This return, the study states, depends on the client’s situation and 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.
The report revealed that participants who received expert guidance had as much as 40% more income during retirement versus those who received no help at all.⁵
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.”⁶
Stop and think about the impact a potential 40% increase in income at retirement would have on your life.
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?
We’re betting the answer is yes.
With 401(k) Maneuver, you can see the potential advantage of having professional help manage your 401(k) account in the example below.
Our goal is to…
- Increase your account performance over time.
- Manage downside risk to minimize losses.
- Reduce fees that are hurting your retirement account performance.
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More Than a Money Manager
One of the biggest reasons people’s retirement 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 retirement savings .
What Many Investors Believe about Third-Party Advice Is Wrong
The data shows that seeking professional help with your investments and financial future helps boost retirement savings.
Yet many people we speak with have common misconceptions about receiving expert advice and, therefore, do nothing.
Here are a few top reasons people don’t get the help they need:
#1 Assuming Your Employer Is Managing Your 401(k)
Even though your 401(k) is employer-sponsored, it does not mean your company is making changes on your behalf. It’s your account. It’s your money. And it’s your job to look out for your future. By law they cannot and will not make changes for you.
#2 Thinking You’re Too Close or Too Far from Retirement
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, how well your account performs early in life may have a BIG impact on the amount of money you have available for retirement.
#3 Thinking You Need More Money Saved Before You Get Help
If you’re hesitant to reach out for advice because you think your account balance isn’t big enough, don’t let that stop you! The truth is, it doesn’t matter how much you have–even if it’s as little as $5,000. Your current account balance should not affect whether or not a third-party expert will work with you.
If you’ve been hesitant to reach out to a professional for help with your retirement savings, there’s no time like the present to take action.
Make the best decision for your financial future.
Download our no-cost guide on how to understand The Different Types of Licenses Financial Advisors Have and What They Mean to You.
Sources:
- https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
- https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
- https://www.investopedia.com/articles/personal-finance/102616/how-much-can-advisor-help-your-returns-how-about-3-worth.asp
- https://www.edelmanfinancialengines.com/press/2014/financial-engines-aon-hewitt-find-401k-participants-who-use-professional-help-are-better-off
- David Blanchet, Head of Retirement, CFP, CFA, Morningstar 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
- David Blanchet, Head of Retirement, CFP, CFA, Morningstar 2014, “The Impact of Expert Guidance on Participant Savings and Investment Behaviors”
- http://www.aon.mediaroom.com/new-releases?item=136959
