A set-it-and-forget-it investing strategy is likely costing you retirement dollars

Who Is Managing Your 401k?

by Andrea Norris

Do you know who is managing your 401k? If you think your company or retirement provider is, you should read on.

What do you know about how your 401k is managed? If your answer is "not much," you could be losing out on thousands in retirement savings, delaying when you can retire if not jeopardizing your retirement completely.

Who Is Managing Your 401k?

A common, costly 401k investing strategy for newbies

For many of us, we took a job out of college for a company that offered us a 401k plan with matching contributions before we really knew much about investing. But free money, right? And we really needed to start saving anyway. So we set up our 401k, decided how much we'd save out of each paycheck and then somewhat randomly choose where to put our money from a list of funds made available through our 401k plan provider.

Many of us did this primarily on our own, with little research and without the guidance of a financial advisor. And we used a set-it-and-forget-it investing strategy that included a brief glance at our monthly statements followed by a sigh of relief when the balance went up and a grunt of frustration when it went down. Because, quite frankly, we feared that changing anything within our 401k plan could make things worse. After all, what did we really know about investing?

I'm not a financial expert and I can't afford a financial advisor

The simple fact is that most 401ks are self-directed and most of us are not financial experts. And a lot of us are denying ourselves a more comfortable retirement because we're not sure how to best manage our 401k, or other investment accounts, and we cannot afford a financial advisor to do it for us. At least this used to be true.

Technology and the internet has made many investment services affordable to those of us with smaller savings balances and one company in particular, blooom.com (yes, that is three O's!), has made 401k management affordable to just about everyone.

Optimize your 401k for a monthly Netflix-like fee

Would $10 per month be worth it to you to earn hundreds, if not possibly thousands more with your 401k than you could managing it on your own? According to this report from FinancialEngines.com, a professionally managed retirement account can grow twice as much as one that is self-managed.

Even if your 401k only grows 25% more, or 15% more for that $10 per, more is still more. And the guys at blooom.com want to help you do just that for the cost of one lunch out per month or two large morning lattes from your favorite coffee house.

Would you like to see how blooom.com can help you optimizing your 401k? Start your free 401k analysis now.

A digital advisor is probably better than no advisor

Although I know I should be educating myself more on investing and retirement planning because I do not have a financial advisor, I don't. I don't have the time. I don't really have the interest. And I don't have the confidence that I'd make the wisest decisions anyway. But I also know what I don't know. Yes, I know most 401k basics, but I don't fully understand what 401k rebalancing is or when or why I should do it or if I should set up my account up to do it automatically. I don't know how to choose the right stock vs bond mix for my retirement goals or how or when to choose target date funds.

What I do know is that I don't have as much money in my 401k as I probably should at my age. Which is why a company like blooom is perfect for someone like me.

Yes, blooom is a digital advisor, or roboadvisor, and not everyone is comfortable with the thought of a "computer managing their money." But the algorithm blooom uses to manage 401(a)s, 401(k)s, 403(b)s and 457 plans was created based on a method developed by a Certified Financial Planner. For an affordable $10 per month, the experts at blooom use this algorithm to guide clients with the following:

  • Investment Selection: According to blooom, Eenie, Meenie, Miney, Moe is not the smartest way to pick 401k investments. My 401k balance backs up their theory. I think you'll find their method works better if this has been your investing strategy until now.
  • Reducing Hidden Fees: With blooom, you still pay the same internal 401k fees that you always have for your 401k plan, but a transparent $10 monthly fee is all blooom charges for their service.
  • Suspicious Activity Alerts: Accounts are continuously monitored for large withdrawals and other suspicious activity.
  • Rebalancing: Rebalancing your 401k involves bringing your investments back to your target asset allocation. I have no doubt blooom can do this better than I can on my own since I am not sure how or when to actually do this or what target asset allocation actually means.
  • Market Guidance: Blooom acknowledges the road to retirement is a bumpy one and that they will do the heavy lifting to help you map out the best road to your retirement, as well as help keep your panic in check by providing guidance and options when the market is down.
  • Ask a Financial Advisor: Blooom is a fiduciary, meaning they are legally obligated to act in your best financial interest. You can ask them about anything that has an impact on your finances either my phone, email or chat. (Yes, you can speak to a real live person!)

And if you find another company you think can do all of this better or you decide to become an expert investor? You simply cancel your blooom account. When you sign up with them, you are not transferring your 401k to them. It stays right where it is at. They simply help you manage and optimize it.

Is blooom right for everyone?

One thing blooom does not do when creating your retirement plan for 401k optimization is take into consideration any other investment accounts that you might have. Many financial advisors will tell you that a holistic approach to financial planning that makes decisions based on all of your investment vehicles collectively is best for those who have multiple retirement accounts. Financial planning companies such as Betterment or Personal Capital might be better suited to build your retirement dollars if you do have multiple accounts but do not yet have a financial advisor.

Get a free 401k analysis

If you used the set-it-or-forget-it strategy when you set up your 401k, you might want to consider getting a free 401k analysis from blooom now or find out more about what blooom can do for you. If you thought "that's me" at mention of using Eenie, Meenie, Miney, Mo for choosing your 401k investments, you probably have quite a bit of room for optimization improvement that blooom can provide.

For only $10 per month, and with the ability to cancel your account at any time, there is not much downside to seeing how blooom might be able to help you if you have been winging it with your 401k investing thus far. But the upside to finding out could be the difference between a barely-make-ends-meet retirement or a very comfortable one.

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