One Piece Of Advice That Can Save You Tens Of Thousands From Your 401(k) From A Financial Professional That’s Managed Over $400 Million in 401(k) Assets.

Since the financial industry has robbed many of you of your money, I’m not going to rob you of your time. This is going to be short and to the point.

If you contribute to a 401(k), you likely have the option to invest in a Target Date Fund, or a mutual fund that changes its allocation based on your age or expected retirement date. In many cases, it’s the default option, meaning the selection if you leave your investment choices blank when signing up for the plan.

It’s the set it and forget it choice, highly advertised by your Record Keeper (the bank that provides your plan’s investment) and recommended by most financial advisors. This is because it’s a HUGEEEEEE revenue generator (time saver) for these firms.

Let me explain…

The Target Date Fund is basically an algorithm (even if a fund says it’s not, it likely is) that makes broad allocation decisions in your portfolio, like the proportion of stocks to bonds and so on. Most funds completely ignore geopolitical risks or valuations, and instead focus on the same historic risk-metrics like volatility and so forth. This is a simple decision that any reasonably competent financial advisor could help you with in minutes.

By doing this for you, they’ll charge you 20–80 basis points (.20-.80%) more per year than an index fund selection in the same retirement plan. This upcharge may not seem like a lot year-over-year but, if you do a simple calculation, it can take a huge bite out of your portfolio over time. Is this upcharge really worth it for a simple allocation decision that you can do on your own?

No… But not because you can do it on your own.

Most 401(k) plans (all large ones) hire a financial advisor to help the firm set up the plan and ensure it complies with ERISA regulations. While the advisor is a fiduciary for the Plan Sponsor (your employer, not you), they are responsible for educating employees about investment decisions and must take time out of their day to help them make the proper allocation decisions.

While they’re not exactly hired to help you directly, I’ve never heard of a case where an advisor turned an employee away from this type of advice.

So, why pay .20%-.80% more to invest in a Target Date Fund, when you can email the advisor on the plan and, after 10-minute phone call (every so often), tailor your 401(k) portfolio for your age and expected retirement date.

Especially for young individuals, where an .80% cost each year can lead to tens of thousands of dollars less in retirement savings. It’s just not worth it.

If you reach out to your 401(k) advisor and he’s unwilling to help, email me and I’ll be glad to offer advice. You can find my contact information at