Comments on: Should You Manage Your 401(k) Yourself?

By: ariana

ariana — Mon, 29 Sep 2008 03:15:06 +0000

JLP-
Hi- you seem to know your stuff and I could use a hand. Am getting a lump sum and a monthly payment for the next five years from an inheritance. Want to be smart. I plan to use a part of the lump sum to pay off debts and create an emergency fund. I don’t know any planners other than at my bank. A friend and the estate lawyer know someone they can refer me to, but what do you suggest? Thanks!

By: zest egg

zest egg — Thu, 22 May 2008 01:50:18 +0000

My thoughts are that by age 40, the cost of paying an adviser might be worth it, because there might be enough money in the account for a fee-based adviser to be really cheap compared to the upside of better returns. For 401(k) beginners, though, I would recommend a more do-it-yourself approach. I wrote an article on how to get started: what to do with your 401K

By: Seamus

Seamus — Tue, 13 May 2008 12:16:57 +0000

I think it all depends on the individuals level/interest in their 401(k) account. I work in my companies payroll department and when 401(k) new enrollment forms come across my desk and I see a 22 year old allocating 100% to bonds it makes me cringe. If you have a moderate interest in your retirement well being I think a person should be able to handle it on their own. If you know nothing on the subject, i.e 100% bonds, then the fee would be well worth it.

By: Alisa

Alisa — Mon, 12 May 2008 01:03:04 +0000

I must confess that I never thought of rebalancing my 401(k) until I started doing some self-directed learning on investing. What I realized is that I can and should take a more active role in managing my own portfolio and that it really is not that difficult; if you are willing to do your homework. So, I started a new journey into the stock market! It is very interesting and I am learning a lot. I am also becoming more confident in the decisions I make concerning investments. So much more to learn though! These comments are very helpful.

By: Khyron

Khyron — Sun, 11 May 2008 11:40:03 +0000

No. The reasons are pretty well covered.

The rebalancing thing caught my eye though. Teresa Lo has some interesting ideas on rebalancing frequency in her guide to building your own portfolio. Find it at http://tinyurl.com/34fohw

I rebalance my 401(k) at least monthly and closer to weekly, much as Teresa suggests for her performance portfolio (and I have been doing that since I stumbled on her recommendation). As Foobarista says, I take a holistic view of all of my accounts – 401(k), self-directed Roth, cash accounts, checking, taxable investment account, everything. Its all balanced with respect to every other component; nothing is done in isolation. However, weekly/monthly rebalancing has been very kind to me. I should keep better stats to quantitatively evaluate the performance but I’ve been too lazy to do so.

Anyway, something to think about.

By: Lectrice

Lectrice — Sat, 10 May 2008 19:32:15 +0000

All these comments are very helpful, and thanks especially for yours, Foobarista. At my annual review with my advisor last week I asked him about allocating my holdings across all my accounts, ie, whether my tax deferred accounts (401K, IRA) should hold different kinds of funds than my taxable accounts (except for my 401K they all have sort of the same mix). Without asking about what was going on in my 401K, he shrugged and said everything seemed to be about right. Because of that lack of interest about my entire holdings, his sky-high fees, and more time on my hands, I’m planning on taking back management of my own portfolio (I’m very tempted by the 3 total stock index funds model). Meanwhile I’m trying to figure out how much reclaiming my money’s going to cost me…

By: muddlehead

muddlehead — Sat, 10 May 2008 16:12:03 +0000

yes.

By: Bozo

Bozo — Sat, 10 May 2008 12:41:53 +0000

My $.02. As Poster “Allen” noted, many 401Ks offer but three choices, or perhaps four (aggressive, moderate, conservative, all cash) with the 401K managed by a professional investment company. No need for a fee-based advisor there. Your 401K might be invested with, say, Vanguard, where your options are a bit broader (say, you can pick from 20 – 30 Vanguard funds), but Vanguard is happy to give you advice for free on how to allocate. I’ve never experienced a 401K plan where one’s employer simply says “what do we do with this?”

A bigger issue is whether you need advice when you rollover the 401K, such as when you switch jobs, or when you retire. In that event, I would say that a one-time fee of $300 would be money well-spent, since your options really are unlimited and you may be overwhelmed by the process. Another time you might want a complete, professional portfolio analysis is when you think you are about ten years from retirement. If you can’t answer the basic questions “how much will I need to retire” and “when can I retire”, you need input. Caveat: don’t expect to get unbiased advice from “no fee” annuity sales reps in that regard. One thing you’ll discover is that you can mimic an annuity yourself, using FDIC or NCUA-insured CDs, properly laddered, of course. My ten-year ladder yields 5.75%, all insured.

Yours,

Bozo

By: Banker

Banker — Sat, 10 May 2008 02:43:36 +0000

Although I trade for a living, I am finding with my own money that I have been under performing the last few years. Therefore I have been seriously considering hiring a professional.

Good Post.

Banker

By: Banker

Banker — Sat, 10 May 2008 02:40:46 +0000

I have been debating this recently myself. I feel that my portfolio has under performed the last few years and I am seriously thinking about hiring a professional.

Banker