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Professionally managed 401k?

There are a growing number of companies that provide help for people with their 401k.  

A 2014 AON Hewitt study, looked at 3 prevalent help forms: target-date funds, managed accounts and online advice.(1). According to the study of those participants accepting help, managed accounts represented 50% of help usage (based on assets)(2).  Second was online advice with 38% of assets and third was target date funds with 12% of assets(2).

On average the Help participants earned 3.32 higher annual returns (net of fees) versus Non-Help Participants (3).

What this means for YOU!

AON Hewitt provided an example of the value of Help

The higher returns earned by Help Participants can have a significant impact on their portfolio balances. As an example, consider a Help Participant and a Non-Help Participant.  If both invest $10,000 starting at age 45 and receive the median returns for each age segment shown in the report, by age 65, the Help Participant’s portfolio could be 79% larger than the Non-Help Participant’s portfolio ($58,700 for the Help Participant vs. $32,800 for the Non-Help Participant)—a substantial difference in retirement wealth (4).

Are you investing at an appropriate risk level?

Besides returns, another critical factor in your 401k program is the risk associated with your investments.  The AON Hewitt study used standard deviation to measure portfolio risk, which measures how variable the portfolio's return's are likely to be over a given period of time.

Shown above is the middle 50% of risk levels for both Help and Non-Help participants as well the S&P 500 Index and the Barclays Capital U.S. Aggregate Bond Index (5).  Note that the upper end of risk range is well above that of  a well diversified all equity portfolio.  Also note, that the widest range was for near-retiree Non-Help participants.  This is concerning since they have the least amount of time to recover from a portfolio mistake or market downturn.

The majority (88.6%) of Help participants has risk with the blue bands (10 to 18% standard deviation).  The non-help participants had >38% risk higher than the top of the blue band (18%) and 21% had risk lower than the bottom of the blue bands (10%) (6).  The study assumes the 10-18% band is an appropriate level of risk.  The majority of non-help participants (over 60%) had their 401k at risk levels outside the 10-18% range.

Is your 401k at right level of risk?  Would professional advice help?

Discuss your options for managed accounts in your 401k!

Call or send us a message to arrange for us to meet.


Aon hewitt May 2014 - Help in Defined Contribution plans 2006 through 2012


1 - AON Hewitt Pg 13

2 - AON Hewitt Pg 19

3 - aon hewitt pg 14

4 - aon hewitt pg 15

5 - aon hewitt pg 16

6 - Aon hewitt pg 17

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