March 11, 2013
Tony Farella in USA Today!
The USA Today published an article by our one and only Tony Farella. (Link)
The full text version is shown below.
Is it worth paying for 401(k) advice?
Money Watch, a personal finance column that runs every Saturday, features a financial planner from the National Association of Personal Financial Advisors answering reader questions about saving, protecting and growing your money. To submit a question, e-mail USA TODAY personal finance reporter Christine Dugas at: email@example.com.
Q: My employer offers a service in which an investment company manages my 401(k) savings. The cost is an annual rate of 0.25%. They have a chart that says people normally do 3% better on their investments with their help. I would prefer to see independent results. But being ignorant of the markets, would I be better off getting help? I’m at least 15 years from retirement.
A: Many employers are adding professional investment management services to their retirement plans. I’ve seen the cost of these services range from 0.25% to 1.0%, so it appears that it’s a pretty good deal for you.
Studies do suggest that investors who use advisers do get better returns than individuals going at it alone, but there is no reason that should be true if an investor does some basic research. It’s not magic. Advisers usually have confidence and discipline that are key factors in successful investing.
Most people do not have the time or interest in managing their own portfolios. Individual investors can be their own worst enemy by making emotional decisions about their investments. Those decisions include bad timing (getting out of the market during a crisis), chasing hot sectors of the economy or jumping into the latest investment fad being touted by the news media.
A good investment adviser can remove the emotion and focus on the important factors in creating an appropriate retirement portfolio.
Ask yourself these questions:
1. Do I know how much I need to save each pay period?
2. What is the total amount I need to save before my retirement?
3. What return do I need to reach my goal?
4. Do I have a diversified, balanced low-cost portfolio?
5. Am I taking the right amount of risk to reach my goal?
6. Do I have the discipline and confidence to stay the course when things get rocky?
If you don’t know all six of the answers, then an independent adviser could be quite valuable. Armed with the correct information, the adviser can construct a well-diversified portfolio that’s specifically designed to give you the best chance of maintaining your lifestyle in retirement.
Anthony Farella, NAPFA-Registered Financial Advisor
Rockbridge Investment Management, Syracuse, N.Y.