There is admittedly no more important employee benefit than healthcare insurance, but your 401(k) plan follows immediately after it. And we believe that now is the ideal time to start contributing if you have not done so, increase your contribution amounts if you are already participating, and consider investing in more aggressive options if you have a long time to go before retirement.
We share in the sorrow that is felt around the world from the COVID-19 virus and ensuing global shutdown. There is no question that it is time to grieve the loss of loved ones and to process all the health concerns and financial difficulties. But eventually our wounds will heal, and we will begin thinking about our future. And if the recent market decline has caused stress, imagine how being ill prepared with retirement savings will feel when the time comes. It is one of the most critical but overlooked benefits offered to you.
Our professional tips:
- If you have not enrolled in the plan, it is a great time to start. The market has dropped double digits year to date, and the economic shock was caused by a health crisis not a financial one. Volatility could very well continue for the next 6-12 months, maybe slightly longer, but for long term investing – this is the time to get started! Additionally, if your employer contributes you are currently missing out on free money.
- Have you spent less money in the past four weeks? Make this a permanent habit. The quarantine has paused many of our usual activities – eating out, going to the movies, buying $6 coffees, and taking trips to name a few. Hopefully you have spent less than normal in the recent past. This is great discipline for retirement savings. Spend less today and put more in your 401(k) account. You now have a sense of what you can permanently cut out to make that happen.
- Ramp up your exposure to stock funds. Stock funds tend to offer higher returns than bond funds over time because stocks are fractional ownership in a company while bonds are loans to the government and companies. Ownership is riskier than lending and that higher risk is typically rewarded with higher potential returns over time. We had previously written about dollar cost averaging and this can be done with new investments into the account as well as shifting exposure from bonds to stocks over a set period.
We are here for you. When your schedule permits, we are ready to support you and your employees with our fiduciary services.
Access third party articles about 3(38) fiduciary services for small businesses:
- SHRM – A 401(k) fiduciary checklist
- Forbes– The Solution To Small Business Owners’ Biggest 401(k) Problem
- Forbes – Benefits Of Adding 3(38) And 3(16) Fiduciary Protection To Your ERISA 401(k)/403(b) Retirement Plan
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