Hopefully your place of employment offers some sort of retirement plan that you are utilizing to save money. You might have a 401k account if you work at a for-profit business. Some other types of retirement accounts that you might have are a 403b annuity or a 457 deferred compensation plan. 403b annuities are for workers like nurses and teachers. 457 deferred compensation plans are for government employees. These retirement plans all share some common characteristics. Most of them include a menu of mutual funds that you can choose to invest in. Plans normally include anywhere from 10-20 choices. So knowing this, how diversified is your retirement plan at work?
Our guess is probably not very diversified. The average retirement plan includes only a handful of small-cap funds, mid-cap funds, and international funds. The vast majority of plans are typically made up of mostly large-cap funds and age-based asset allocation funds. This doesn’t leave much opportunity for investors to create a diversified account. Conversely, some retirement plans offer so many options that investors simply have no idea what to do. Many times they’ll end up putting the entire account into one fund.
So if your answer to the question, “How diversified is your retirement plan at work?”, was “Not very diversified”, what can you do?
A lot of retirement plans are beginning to offer self-directed brokerage options (SDBO’s). This option allows investors to open a brokerage account within their retirement plan. Different retirement plans have different guidelines. Some let you move 100% of your retirement savings into the account, while others have different criteria. If your plan offers this, then you can do your own amount of diversification. So find our if your retirement plan offers a self-directed brokerage option today!
No matter how many choices you have in your retirement plan, you need to know whether to be aggressively investing or conservatively waiting for better opportunities. If you don’t know when to be on offense or defense, saving for retirement will be tough. That’s where Mullooly Asset Management can help you. Through use of point and figure technical analysis we manage the risk for our clients whether they have a 401k account, 403b annuity, or 457 deferred compensation plan.