A Further Look: Working With a Fiduciary Can Add Value and Confidence to Your 401(k) Plan


By David B. Root

For many, their 401(k) is their primary, if not sole retirement plan. In fact, according to a recent survey* by Schwab Retirement Plan Services, 60 percent of savers and 53 percent of non-savers who have at one time contributed to a 401(k) say their 401(k) is their largest or only source of retirement savings.

That’s why it’s important to understand the details of your plan. Unfortunately, according to the Schwab survey, more time is spent researching options on buying a car or planning a vacation than making a 401(k) investment choice.

Working with a professional, especially a fiduciary, can provide information and advice to broaden the scope of your retirement savings effort.

The DOL defines Fiduciary responsibilities as such:

The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan's investments in order to minimize the risk of large losses. In addition, they must follow the terms of plan documents to the extent that the plan terms are consistent with ERISA. They also must avoid conflicts of interest.

Catherine Golladay, senior vice president, 401(k) Participant Services and Administration at Schwab Retirement Plan Services emphasizes: “It’s important for people to understand that whether you have $1,000 or $100,000, your wealth merits help to maximize its potential.”

In the Schwab survey, savers and non-savers both said their investment confidence would grow dramatically with the help of a financial professional.

  • 76 percent of savers say they would be very/extremely confident if they had the help of a financial professional.

  • Similarly, 70 percent of non-savers say they would be very/extremely confident if they had the help of a financial professional.

Other Notable Survey Findings

  • Eighty-nine percent of savers and 79 percent of non-savers say they’re relying on themselves or their spouses for their income in retirement.

  • Just half of savers (52%) and non-savers (50%) believe they will receive Social Security benefits in retirement.

  • Even though 401(k) investment fees can have a dramatic impact on retirement savings, they are less likely to influence the choice of 401(k) investments than they are the choice of a credit card, online shopping destination, ATM or airline.

While you may feel you are “doing OK” with your 401(k), there is a chance that what you don’t know can hurt you. Especially when it comes to unknown fees and the adherence to fiduciary standards by your advisor.

Thanks for reading,

Dave

To learn more about D.B. Root’s client segments and service offerings, contact David Root d.rootjr@dbroot.com

As a reminder, many articles, including "A Further Look," contain opinions and observations that can shape or advance a viewpoint. However, when it comes to portfolio management, the challenge is to filter and translate opinions and observations into actionable items and to resist straying off course with, or within, a portfolio. To learn how DB Root’s approach to asset management attempts to meet this challenge for clients, please feel free to contact us: 412-227-2800.

This material has been provided for general, informational purposes only and it not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.

*Schwab Retirement Plan Services, Inc. The survey is based on 1,000 interviews and has a 3 percent margin of error at the 95 percent confidence level. Survey respondents worked for companies with at least 25 employees and were 25-70 years old. Survey respondents were not asked to indicate whether they had 401(k) accounts with Schwab Retirement Plan Services, Inc. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between June 2 and June 18, 2017.

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