Did you ever sit through an investment education seminar at work feeling totally dumbfounded? You are not alone.
To make sure your employer’s next 401(k) investment meeting doesn’t go by in a blur, it pays to prepare in advance.
Financial professionals running group meetings will often spend up to 30 minutes or more helping you out individually, after the session concludes. And while you usually won’t get actual “advice,” telling you exactly where your 401(k) contributions should go (unless you or your employer pays for it), one-on-one financial education is frequently provided free of charge in connection with your employer’s group meeting.
Here’s how you can take full advantage:
1. Bring your financial documents. When Ron Bartlett, a financial advisor in Lexington, S.C., runs a company-sponsored investment education meeting, he advises plan participants to bring a balance sheet (a list all of your assets and liabilities), any bank CD statements, a list of company retirement plans (including those from previous employers) and an accounting of outstanding credit card debt.
Also good to have on hand: A list of your monthly mortgage obligations, IRA accounts and other investment statements, life insurance policies, Social Security statements and the value of your home. If possible, bring a copy of your last tax return, says Bartlett, as well as a list of your core financial concerns, the ones that keep you up at night.
The agreement Bartlett Financial has with the company’s broker/dealer, LPL Financial, does not permit advisors to give participants specific investment advice, but “I can supply Morningstar and S&P ratings and reports," he says. "We have discussions with them of what investment categories they should consider." All this is free of charge.
2. Locate a copy of your company’s summary plan description (SPD). Wondering whether you can take a loan on your 401(k) and how you need to pay it back? Curious about how long you need to work before you're permitted to withdraw your employer’s 401(k) match? Everything you want to know is the SPD, observes William Harris, a Certified Financial Planner with WH Cornerstone Investments, in Duxbury, Mass., so it’s good to be familiar with the document before your company seminar. Every employer makes an SPD available to employees, often via the company Web site, Harris says. Check with your human resources department if you need help.
3. Find out what education tools your company offers and use them. Usually, there is an 800 number to call with questions about how your plan contributions are invested and how to make changes and when. Frequently companies also offer ongoing education and interactive services like 401(k) transfer capabilities via their Web site. Beyond that, “We’re seeing a lot of 401(k) providers do questionnaires now on risk tolerance,” says Harris, adding that “It’s gotten so sophisticated that often if you say your risk tolerance is 'aggressive' and you’re willing to commit a good amount to stocks, for instance, the plan administrator will offer a program recommending an asset allocation for you and allow you to hit a button and make your menu choices on the spot."
4. Ask if one-on-one counseling is available. Financial planners are often able to capitalize on company education sessions by capturing one or two participants as personal clients, which is one reason many are happy to speak with you privately at no obligation or cost to you or your employer.
5. Don’t be afraid to ask about fees. Remember that a 401(k) fund may have an internal cost or “expense ratio” for investment management, but also a brokerage commission or “load” (a fee for advisors who get paid for ferreting out the best fund choices). If the fees are too high and your company has no match, it may make sense to open an IRA instead of a 401(k). What’s high? Harris says he’d raise an eyebrow if a bond fund were offered for more than a .75% asset fee, or if an equity fund were charging more than 1.5%, unless it’s for an international or small-cap fund where more research is required from fund companies.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.