Transferring funds from your 401(k) to an individual retirement account (IRA) can be prudent. It provides increased investment control and potentially more diverse investment options. However, due to various pitfalls and nuances, the 401(k) rollover process requires planning and anticipation.
Retirement accounts, such as 401(k)s and IRAs, are expected to be a significant source of income for the estimated 30 million individuals set to retire by 2030.
So, if you’re struggling with managing your 401(k) plan, you’re not alone; you don’t have to handle it all alone. A financial advisor can help you in managing your 401(k).
Here are the benefits of hiring professional help to ensure you stay on track.
How does a 401(k) work?
A 401(k) plan is a tax-advantaged retirement savings account that allows employees to save a portion of their salary before taxes are applied. This means your contributions and any investment gains grow tax-free until you withdraw them in retirement.
Many 401(k) plans feature a unique employer match program as a standout feature. EmployersEmployers may match your contributions to a predetermined amount, usually between 4% and 5% of your pay. Thanks to this match, which is like getting free money, your investment returns will increase significantly immediately.
The main advantage of 401(k) investments is the tax-deferred growth of your funds. Without being reduced by taxes, your money can compound over decades, potentially generating significant growth over time.
Furthermore, if you change jobs or retire, you can benefit from a 401K plan rollover, enabling you to transfer your funds to another retirement account, such as an IRA, without incurring taxes.
Do you need a Professional Retirement Planning Advisor for your 401(k) plan?
If you’re comfortable contributing, selecting investments, and utilizing free advice from your plan administrator or employer, you may feel confident managing your account independently.
However, the investment decision-making process may not be simple or comfortable for everyone.
On the other hand, some want to maximize their retirement funds and steer clear of mistakes by utilizing the expertise and experience of a professional.
Here are a few ways a financial adviser can assist with your 401(k) plan:
Education and guidance
A financial retirement planning advisor can help you understand your retirement plan, explain investment options, and address any questions to ensure you fully utilize this retirement-saving tool.
Selecting investments
An adviser customizes investments based on your financial situation, goals, risk tolerance, and time horizon, adjusting as needed due to changing life circumstances or market conditions.
Staying on track
A financial adviser can assist in maintaining long-term financial goals, navigating market fluctuations, and facilitating 401(k) rollovers for uninterrupted retirement savings.
Is it worth Hiring a financial adviser for your 401(k)?
Balancing the additional cost of hiring a financial adviser with the comprehensive value they can offer beyond the existing 401(k) plan fees is crucial. Your 401(k) already incurs significant management fees for investment options and services, which can impact the growth of your investment.
The additional cost of their services and personalized advice may enhance your portfolio’s performance, potentially offsetting their long-term fees.
Bottom line
Some may find managing their 401(k) easy, while others will find personalized guidance and expertise that a financial advisor offers to manage 401(k) accounts.
To make sure you’re getting the most out of your 401(k) plan, speaking with a financial advisor may be a wise choice if you’re feeling overwhelmed by making investment decisions or want to take a more comprehensive approach to retirement planning.
