Finding this investment opportunity in your 401k could add 25% to your net worth in the long run.
In case you haven’t checked, your 401k investments are most likely invested in high-cost investments that are bleeding your retirement savings slowly but surely. Through no fault of your own, you have been provided a selection of mutual funds that will ultimately cost you a fortune…literally.
You don’t have to walk in the dark unarmed. There is a silver bullet.
Limited options:
Most 401k plans are put together by a very well-meaning business owner or employee of the company. They put their trust in a commissioned salesperson that “helped” them pick out a basket of investments that would be best suited for the plan participants.
You’ll be shocked to learn the salesperson and 401k company benefit (a lot) from directing you towards certain investments over others. This dance is very expensive for you, and very lucrative for them. In fact, in all likelihood, you are paying close to 5x what you could be!
How much does 5x cost you?
Depending on your investment strategy, paying these excessive hidden fees can drain your savings by over 25% over a few decades. If you have $250,000 in your 401k, it would be common to be paying as much as $3,000 too much every year without knowing it. That expense compounds to a huge figure over time. You don’t need to take that abuse!
Find your silver bullet:
If your company is not one of the 20% that offer a Self Directed Brokerage Account (SDBA) for their participants, it might be time to send a strongly worded email to the powers that be asking for one. Here’s why.
The SDBA allows you to keep your money in your 401k while opening youup to the universe of investment options. That may sound scary, but that’s what the 401k company wants you to think. You see, they may not make as much money if you move towards the SDBA.
Moving to the SDBA, if it’s available to you, is normally a straightforward process that the plan administrator will be able to walk you through. Once you are ready to go, you will need to determine how you want to invest. The good news is that the world is now your oyster. The bad news is that you can get yourself into more trouble if you’re not careful.
There are a lot of good resources online to help guide you with your investment selections. The idea is to find information you trust and keep the expenses as low as possible.
