My first job out of college was in the public affairs office of a non-profit hospital system in the suburbs of Philadelphia. One of the benefits of working there was something called a 403(b). My boss suggested I look into it and start saving for retirement.
“Yes, of course,” I said using my serious face. Hmmm, now what is a 403(b)?
A week later, I sat with a Vanguard representative who was having one-on-one meetings with employees. Excited to learn about investing, I asked her to tell me everything about stocks, bonds, 403(b)s, everything!
Then came a big surprise. She told me that she could not give me advice. Huh? She told me that she was not licensed to give advice, but that she would give me a quiz that would tell me how someone like me should invest. Ok. I sat down in front of a computer and got started. Several clicks later, my computer told me that at the ripe old age of 22, I should invest about sixty percent in stocks and forty percent in bonds. Something didn’t seem right.
Today, I have my MBA in finance and have worked as a financial advisor for more than a decade. Even after all this time, something still doesn’t seem right to me about investing in your retirement plan at work. Employer plans are things like 401(k)s, 403(b)s, SIMPLE IRAs, etc. They are great tools, when used correctly and can help build significant wealth. In fact, for many people, an employer plan will be the largest asset you have for your retirement. But, unfortunately, they can be confusing, cryptic and hard to navigate.
The end result is that many investors do it wrong. Every year, Dalbar does a study that shows that individuals consistently underperform the basic stock and bond benchmarks. The reason is simple: Investing is highly emotional. When the market is good, people want to get in. When the market is bad, people want to get out. Translated, this means that we feel comfortable buying high and selling low, when we really need to do the opposite to make money.
In an environment like this, it is easy to make mistakes. But not anymore!
We have identified the four biggest mistakes investors make it comes to their 401(k) and how to avoid them.
Click here to see our white paper called, The Foley Hillsley Guide to 401(k) investing. Employer plans can be a tricky thing, but they don’t have to be. If you would like a complimentary review of your 401k, please feel free to reach out at email@example.com or 610-238-6636.