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Are You Getting the Most Out of Your 401(k)?

If your employer offers a 401(k) plan, you likely know two things about it: 1) you can automate investment of a portion of each paycheck to make saving easy, and 2) whether or not your employer offers matching contributions (i.e. free money).

Outside of this basic information, 401(k) plans can be a bit confusing for the average investor. The financial jargon alone can be enough to deter you from investigating the best way to protect and grow your money over the long-term. This is one of the main reasons so many people leave their retirement accounts on auto pilot, failing to learn ways to enhance their earnings. If you’d like to avoid this fate, information is key.

Knowledge is Power… And Money

So, what do you do when you want to make educated 401(k) investment decisions, but you don’t know where to start? You could hire a financial advisor, sure. However, you may not have to.

As it turns out, nearly two-thirds of 401(k) participants have access to a free tool at their fingertips – online, personalized advice specifically to help workers make the most of their investment portfolios according to their personal financial goals. The problem is, most workers aren’t aware they are eligible for such a service. In fact, a recent study from Vanguard showed that a mere six percent of eligible workers have used this service. What gives?

The Vanguard study also found that, of the 75 percent of workers who take advantage of their employer’s 401(k), nearly 40 percent have a balance of under $10,000 in their account. With so little attention given to these accounts, it’s likely that most people simply do not know they have access to personal investment guidance.

Why You Should Take Advantage of Professional Retirement Resources

Retirement has a habit of taking many people by surprise – even those who thought they were financially prepared. Instead of risking it, you should learn as much as you can about skillfully managing your money. If your 401(k) plan offers access to free guidance, you’re doing yourself a disservice if you choose to ignore it.

Failing to make smart decisions about your money can have dire consequences. When it comes to retirement planning, in particular, even a minor mistake can cause you long-term financial damage that thwarts – or delays – your retirement plans.

Consider this example: you don’t feel confident in your investment knowledge, so you continue to invest your money in conservative funds that average about 2 percent in returns annually. You may feel like you’re playing it safe with this investment method, but think about it – a 2 percent return won’t even keep up with inflation over time, meaning your money is losing value.

Utilizing professional retirement guidance can save you a lot of stress – and a lot of money – by keeping your 401(k) on a firm footing from year to year.

When To Ask For Help

Although there is no bad time to ask for investment guidance, there are certain moments in time when it makes good sense to reach out and ask for help. When you’re experiencing a big life change – say, marriage, your first baby, buying a home or sending a child to college – there will be an immense impact on your finances. Seeking professional guidance offered through your 401(k) plan will ensure your retirement plan is still on track for the long-term.

If you’re concerned that you don’t know enough to ask the proper questions of a financial professional, it’s even more important to reach out. Financial services professionals don’t expect you to know everything, and speaking with them can help you feel more in control of your financial outlook. A recent survey from Northwestern Mutual actually found that 66 percent of Americans feel more confident about their finances after speaking with a professional in the industry.

How To Find Out About Your 401(k) Financial Planning Services

If you aren’t sure whether your retirement plan comes with expert guidance, contact your HR department to learn more. You can also call your plan provider directly.

If you have the opportunity to speak with a financial planning professional through your 401(k) plan, start a conversation today. The sooner you reach out, the sooner you can begin making wise decisions about your investments and ensure your retirement plan remains on track. After all, when it comes to something as important as your financial future, it always pays to learn more.

Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”).  This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.

Zachary Morris

Zachary Morris, CFP®

Having traveled to over 35 countries, Zach is a believer in Ralph Waldo Emerson’s statement that Life is about the journey, not the destination. Being a CERTIFIED FINANCIAL PLANNER™ provides Zach the opportunity to help clients define and realize their journey, and co-founding Paces Ferry Wealth Advisors, an independent firm, allows the freedom to define the client experience along the way.