00:00:08Introduction to 401k Allocations
00:01:34Understanding 401k Basics
00:05:38Exploring Self-Allocated Options
00:08:44Transitioning to Customized Investment Strategies
درباره این اپیزود
In this episode Rob and certified financial planner Trevor Bell walk through how 401(k) allocations work, comparing target-date retirement funds with self-allocated options and explaining the pros and cons of each.
They cover basics like fund lineups, risk and time horizon, expense ratios, rebalancing responsibilities, and when to consider rolling a 401(k) into an IRA or a professionally managed account.
🤝 Get Personalized Financial Guidance: 📌 Learn about the SFM process: https://www.sfmadvisorgroup.com/ 📌 Schedule a consultation with our award-winning team 👉 https://go.oncehub.com/SecurityFinanc... 🔔 Subscribe for More Expert Insights: / @bapodrob
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WEBVTT
00:00:00.017 --> 00:00:03.577
Today, we're breaking down how your 401k allocation actually works,
00:00:03.757 --> 00:00:08.377
what your options really are, and why set it and forget it isn't always the best strategy.
00:00:08.937 --> 00:00:12.297
Today's episode is brought to you by Security Financial Management.
00:00:14.757 --> 00:00:19.217
Welcome back to the Best Advice Podcast, guys. I'm your host, Rob DeVallio.
00:00:19.517 --> 00:00:22.557
Here's always a good truck. We're on roll again, baby. What's up,
00:00:22.817 --> 00:00:24.417
baby? Are you up to date time off today?
00:00:24.877 --> 00:00:27.117
I don't. You're up to date time off. You're really working. Oh,
00:00:27.197 --> 00:00:28.757
we're early. We're early.
00:00:29.217 --> 00:00:34.057
Yeah, I hear it. Yes. Absolutely. And that's why, you know, we got a long day ahead of us.
00:00:34.977 --> 00:00:38.377
As you know, you guys all know Trevor Bell, the certified financial planner.
00:00:38.517 --> 00:00:39.757
He has security by the management.
00:00:40.057 --> 00:00:43.017
He's a young buck. We like to call him Trump because he never stops.
00:00:43.037 --> 00:00:46.557
And he's always on the grind for the client. So what's up, Trevor?
00:00:47.037 --> 00:00:50.117
Good to see you, my friend. Good morning. Good morning. Good morning.
00:00:50.337 --> 00:00:54.057
You had a good weekend? I did. Yeah, I had a great weekend and I'm excited to,
00:00:54.057 --> 00:00:56.197
you know, move into the holiday season.
00:00:56.437 --> 00:01:02.337
Yeah, yeah. It's crazy. It's like we... Time has just gone by way too quickly. I thought things...
00:01:03.897 --> 00:01:10.157
I got some work to do. For sure. I usually don't procrastinate with that stuff, but...
00:01:10.454 --> 00:01:14.694
I have not been great this year to say the least i'm so i want a really good present,
00:01:15.234 --> 00:01:21.594
that might make up actually a lack of hope right my dad i did college and i
00:01:21.594 --> 00:01:27.574
reached out his coach but when i would get the studio oh that's awesome get
00:01:27.574 --> 00:01:32.434
it in my case no kidding i hope i hope he doesn't see this early yeah he won't okay.
00:01:34.954 --> 00:01:39.654
Well let's get to the question of the day today's question comes from stew from
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illinois Stu, what you got for us?
00:01:43.434 --> 00:01:47.554
I'm enrolling in my 401k at work right now, and I'm unsure on what I should
00:01:47.554 --> 00:01:49.174
be choosing for investment allocation.
00:01:49.474 --> 00:01:51.754
Can you dive into general 401k knowledge?
00:01:52.754 --> 00:01:56.634
Thank you, Stu. Great question. This is like kind of an important stuff that
00:01:56.634 --> 00:01:57.654
I don't really teach you as anyone.
00:01:57.914 --> 00:02:00.614
Yeah. It's like so important to like building wealth. Right.
00:02:00.714 --> 00:02:02.354
How are you allocated your 401k?
00:02:02.734 --> 00:02:06.634
How do you enroll in all that? Well, in fact, a large percentage of Americans
00:02:06.634 --> 00:02:08.614
live off their 401k. Yeah.
00:02:09.054 --> 00:02:12.334
You know, once that time comes into retirement. So it's, it's critical,
00:02:12.634 --> 00:02:14.754
of course, that you're contributing enough.
00:02:14.974 --> 00:02:18.314
And we've had other episodes for that, but we're not going to dive too much
00:02:18.314 --> 00:02:22.594
into the contribution element, but also allocating properly. Right.
00:02:22.794 --> 00:02:27.554
So, so how does it work? I don't know. Like give me a quick brief work. Yeah. Really?
00:02:29.174 --> 00:02:33.894
Yeah. So one thing I will say in the 401ks is that every employer is different.
00:02:33.894 --> 00:02:38.994
And probably what Stu is saying in his instance is he's got a fund lineup.
00:02:39.054 --> 00:02:41.274
He's only got so many funds to pick from.
00:02:41.414 --> 00:02:46.274
And that's basically based upon the employer's decision on what funds they'll
00:02:46.274 --> 00:02:48.134
allow their employees to invest in.
00:02:48.687 --> 00:02:54.967
But generally speaking, most 401ks funnel participants in the two main allocation paths, right?
00:02:55.107 --> 00:03:00.067
You've got your target date retirement series path, or you've got your self-allocated.
00:03:00.527 --> 00:03:09.587
And in a normal situation, an investor comes to you, you need to spill to that.
00:03:10.167 --> 00:03:15.747
Exactly. Yeah, it's a customized portfolio. So typically, well,
00:03:15.947 --> 00:03:19.627
yeah, and actually, I'm starting to dive into that a little bit more.
00:03:19.707 --> 00:03:23.427
So when you've got the target date retirement series, those are your really
00:03:23.427 --> 00:03:25.927
one size fits all portfolios.
00:03:26.067 --> 00:03:32.067
And they range anywhere from 2025 to, in some cases, 2070 now almost.
00:03:32.247 --> 00:03:34.727
Oh, wow. And yeah, it's crazy.
00:03:35.087 --> 00:03:38.147
It's a bit of, like, fundamentally, they're all the same thing,
00:03:38.247 --> 00:03:44.207
Rob, right? So your target date retirement series that are 2070 or 2065,
00:03:44.527 --> 00:03:48.067
2060, those are your more aggressive funds.
00:03:48.907 --> 00:03:55.747
What is the date? Great question. So the date actually means your targeted date of retirement.
00:03:56.187 --> 00:03:59.347
So let's just say we're 30 years old right now.
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We expect to retire at 65. We want to pick something 35 years from now.
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So right now we're 25. That would bring us to 2060. is to target a retirement
00:04:09.467 --> 00:04:10.927
fund we would want to pick.
00:04:11.247 --> 00:04:14.667
So what if I want to retire and not be in those days again?
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Of course not. And that's where the lack of customization comes in.
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So we can't buy funds. Right.
00:04:22.927 --> 00:04:26.587
Yeah. Because life changes and we don't know exactly what we're going to be doing.
00:04:26.867 --> 00:04:31.627
And furthermore, what we dove into in former episodes is risk tolerance.
00:04:32.007 --> 00:04:38.627
You could be 20 years old and not have a AD risk tolerance, which is typically where those.
00:04:39.775 --> 00:04:44.735
Later target date retirement funds sit at it from a risk standpoint,
00:04:45.515 --> 00:04:51.195
whereas your 2030s, 2035s, it's closer to retirement, so they're generally more conservative.
00:04:51.515 --> 00:04:55.295
And they kind of sit on a risk scale of like 50, 60, somewhere around there.
00:04:55.395 --> 00:04:56.155
It depends on the manager.
00:04:56.795 --> 00:05:00.555
Either way, no matter how we look at it, with the target date retirement series
00:05:00.555 --> 00:05:04.495
funds, it's really a one-size-fits-all fund.
00:05:04.495 --> 00:05:08.515
So you're basically, instead of being a number, like your risk tolerance,
00:05:08.915 --> 00:05:12.175
that's really a portfolio based on that risk tolerance of one to one hundred.
00:05:12.455 --> 00:05:14.055
Right. Do you have one to a three?
00:05:14.475 --> 00:05:19.595
That's exactly right. Yeah. Yeah. So what do you suggest if,
00:05:20.155 --> 00:05:22.695
I guess, for me, right, around 30? Sure.
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What would you suggest if my two options were to sell if they're five years
00:05:27.755 --> 00:05:29.715
away or like 10 years away?
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Well, so it's just a good question, Rob. And I'll answer that by kind of countering it.
00:05:35.735 --> 00:05:38.075
I'll answer that question. I'm going to be quiet. Yeah, exactly.
00:05:38.435 --> 00:05:44.575
So that would maybe be enticing for you to go to the self-allocated portfolio.
00:05:45.215 --> 00:05:48.115
Oh, self-allocated. That's right. Remember how I mentioned earlier,
00:05:48.235 --> 00:05:49.695
funneling into two different paths?
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Yes, yes. So you've got your target date retirement series funds that are your one size fits all.
00:05:54.675 --> 00:05:58.015
Then you've got your self-allocated option. so that doesn't
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mean that you can go buy tesla stock or after stock
00:06:01.275 --> 00:06:04.435
of your 401k what it means is they typically give
00:06:04.435 --> 00:06:09.135
you and all employers are different but generally anywhere from 10 to 30 different
00:06:09.135 --> 00:06:13.975
funds to pick from ranging from anywhere from small to large cap companies both
00:06:13.975 --> 00:06:18.675
growth and value sector in the fixed income side we could see anywhere from
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short-term government securities to of long-term corporate securities.
00:06:22.735 --> 00:06:27.475
And so you can build your own portfolio. Now, there's a limited set of options,
00:06:27.475 --> 00:06:31.755
as we've said throughout the entire episode, but it still gives you accessibility
00:06:31.755 --> 00:06:33.555
to build a portfolio to you.
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The pros in that is, you know, could potentially be less expensive from an expense ratio standpoint.
00:06:41.590 --> 00:06:45.570
But then furthermore, you can actually target sectors in the market that you
00:06:45.570 --> 00:06:49.750
see as advantageous and build a portfolio to your risk.
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But like anything else, there's not automatic rebalancing with that stuff.
00:06:54.970 --> 00:06:59.130
So you add yourself a job as you're all. That's what I was saying.
00:06:59.490 --> 00:07:04.370
Yeah. Yeah. And that's exactly it. So now you're the manager that was formerly
00:07:04.370 --> 00:07:08.890
managing that, you know, institutional management target date retirement fund.
00:07:09.110 --> 00:07:11.170
You become that individual on it. Wow.
00:07:11.870 --> 00:07:16.790
That's a lot. Yeah, it is. And that's why you see so many people flowing to
00:07:16.790 --> 00:07:21.090
the target date retirement series. But it's important for me to educate the
00:07:21.090 --> 00:07:23.610
difference between the two. And then also, again.
00:07:24.354 --> 00:07:28.534
Return standpoint, the target day retirement funds are solid funds.
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I'm not bashing them by any means. They can build wealth for individuals.
00:07:33.874 --> 00:07:35.194
We've seen it plenty of times.
00:07:35.734 --> 00:07:38.674
To that same point, just understand that it's not customizable to you.
00:07:38.834 --> 00:07:42.274
Correct me if I'm wrong. What I see in our office a lot is that clients will
00:07:42.274 --> 00:07:45.894
have to get their target day because they don't want to go in there and manage
00:07:45.894 --> 00:07:47.554
all that. Very often, yes.
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And then they have their bigger bucket that is built specifically for them.
00:07:53.474 --> 00:07:55.994
All their risk tolerance, taking into consideration for family,
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their Medicare, their health care, all these other things they account for. Sure.
00:08:00.114 --> 00:08:06.674
And they end up rolling over that 401k eventually into that same bespoke custom plan. Yes.
00:08:07.174 --> 00:08:12.114
That's exactly right. Yeah. So at 59 and a half, and even sometimes as early
00:08:12.114 --> 00:08:18.714
as 55 and a half, we won't get into the weeds on that stuff in terms of rolling over assets from a 401k.
00:08:19.254 --> 00:08:23.074
But yeah, what we always see is, you know, hey, let's build the wealth.
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On both sides, right? Put away into a retirement account with work and then
00:08:28.554 --> 00:08:33.134
also either a retirement account or a taxable account with a professional management.
00:08:33.474 --> 00:08:38.014
And then once that time comes, 59 and a half, 60, maybe you wait a little bit
00:08:38.014 --> 00:08:40.474
longer to retire in your late 60s.
00:08:40.634 --> 00:08:44.194
Then in that instance, you just roll it into your world over IRA and.
00:08:44.754 --> 00:08:49.334
Get invested with institutional management with us, but also a lot more,
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as you said, bespoke, customizable, tailored beer, risk tolerance,
00:08:53.394 --> 00:08:57.334
risk mitigation strategies in there, retirement planning, of course.
00:08:57.534 --> 00:09:02.334
Yeah, that's good and interesting stuff because I know other jobs I've had,
00:09:02.474 --> 00:09:03.474
people are like, oh, what are you doing?
00:09:03.614 --> 00:09:05.974
I don't know, I picked this. Great, put me in it.
00:09:06.374 --> 00:09:11.454
And oftentimes, stick in it for years. Yeah, you don't need to talk. Oh, whatever.
00:09:11.774 --> 00:09:15.574
Right. You're looking to balance every couple of weeks, but you don't really worry about it.
00:09:15.754 --> 00:09:20.674
But it's... Give me the name and difference between the bank too, again.
00:09:21.154 --> 00:09:25.014
Sure. Those dollars. Yeah. So you've got target date retirement funds,
00:09:25.174 --> 00:09:28.474
which are really one size fits all funds.
00:09:28.814 --> 00:09:33.794
They've performed well for individuals in the past. They have a professional manager on top of them.
00:09:33.974 --> 00:09:38.054
And they're typically a little bit more on the expense ratio because of the
00:09:38.054 --> 00:09:41.214
fact that there is a manager handling all of that stuff. And then the other
00:09:41.214 --> 00:09:43.194
side of it is your self-allocated path.
00:09:43.314 --> 00:09:47.294
That's where you could pick anywhere from small to large gap growth or value
00:09:47.294 --> 00:09:52.614
funds and some international funds and even fixed income anywhere from short-term
00:09:52.614 --> 00:09:54.874
government securities to long-term corporate.
00:09:55.034 --> 00:09:58.814
So you've got a little bit more flexibility with those self-allocated funds,
00:09:58.854 --> 00:10:01.534
but you've got a lot more work associated with it too.
00:10:01.834 --> 00:10:05.974
So that's, I would say simple, you know, 30, 45 second answer.
00:10:06.394 --> 00:10:09.614
There it is right there. Amazing. Well, thank you, Stu. We hope that helps.
00:10:09.954 --> 00:10:12.734
You want to talk to any of our financial advisors here at Security Financial
00:10:12.734 --> 00:10:15.394
Management, interested in going over a 401A.
00:10:15.674 --> 00:10:18.654
I want to talk to Trevor, the man right here. We're going to leave a link in
00:10:18.654 --> 00:10:22.354
the description for you. And remember, folks, the secret to wealth is not what you're on.
00:10:22.634 --> 00:10:25.374
It's what you keep. What you keep. Happy days, everybody.
00:10:26.134 --> 00:10:31.034
This podcast is for entertainment and educational purposes only and is not intended
00:10:31.034 --> 00:10:32.834
as personal financial advice.
00:10:33.014 --> 00:10:36.994
Before making any financial decision, please do your own research and consult
00:10:36.994 --> 00:10:38.574
a financial advisor as needed.
00:00:00.017 --> 00:00:03.577
Today, we're breaking down how your 401k allocation actually works,
00:00:03.757 --> 00:00:08.377
what your options really are, and why set it and forget it isn't always the best strategy.
00:00:08.937 --> 00:00:12.297
Today's episode is brought to you by Security Financial Management.
00:00:14.757 --> 00:00:19.217
Welcome back to the Best Advice Podcast, guys. I'm your host, Rob DeVallio.
00:00:19.517 --> 00:00:22.557
Here's always a good truck. We're on roll again, baby. What's up,
00:00:22.817 --> 00:00:24.417
baby? Are you up to date time off today?
00:00:24.877 --> 00:00:27.117
I don't. You're up to date time off. You're really working. Oh,
00:00:27.197 --> 00:00:28.757
we're early. We're early.
00:00:29.217 --> 00:00:34.057
Yeah, I hear it. Yes. Absolutely. And that's why, you know, we got a long day ahead of us.
00:00:34.977 --> 00:00:38.377
As you know, you guys all know Trevor Bell, the certified financial planner.
00:00:38.517 --> 00:00:39.757
He has security by the management.
00:00:40.057 --> 00:00:43.017
He's a young buck. We like to call him Trump because he never stops.
00:00:43.037 --> 00:00:46.557
And he's always on the grind for the client. So what's up, Trevor?
00:00:47.037 --> 00:00:50.117
Good to see you, my friend. Good morning. Good morning. Good morning.
00:00:50.337 --> 00:00:54.057
You had a good weekend? I did. Yeah, I had a great weekend and I'm excited to,
00:00:54.057 --> 00:00:56.197
you know, move into the holiday season.
00:00:56.437 --> 00:01:02.337
Yeah, yeah. It's crazy. It's like we... Time has just gone by way too quickly. I thought things...
00:01:03.897 --> 00:01:10.157
I got some work to do. For sure. I usually don't procrastinate with that stuff, but...
00:01:10.454 --> 00:01:14.694
I have not been great this year to say the least i'm so i want a really good present,
00:01:15.234 --> 00:01:21.594
that might make up actually a lack of hope right my dad i did college and i
00:01:21.594 --> 00:01:27.574
reached out his coach but when i would get the studio oh that's awesome get
00:01:27.574 --> 00:01:32.434
it in my case no kidding i hope i hope he doesn't see this early yeah he won't okay.
00:01:34.954 --> 00:01:39.654
Well let's get to the question of the day today's question comes from stew from
00:01:39.654 --> 00:01:42.334
illinois Stu, what you got for us?
00:01:43.434 --> 00:01:47.554
I'm enrolling in my 401k at work right now, and I'm unsure on what I should
00:01:47.554 --> 00:01:49.174
be choosing for investment allocation.
00:01:49.474 --> 00:01:51.754
Can you dive into general 401k knowledge?
00:01:52.754 --> 00:01:56.634
Thank you, Stu. Great question. This is like kind of an important stuff that
00:01:56.634 --> 00:01:57.654
I don't really teach you as anyone.
00:01:57.914 --> 00:02:00.614
Yeah. It's like so important to like building wealth. Right.
00:02:00.714 --> 00:02:02.354
How are you allocated your 401k?
00:02:02.734 --> 00:02:06.634
How do you enroll in all that? Well, in fact, a large percentage of Americans
00:02:06.634 --> 00:02:08.614
live off their 401k. Yeah.
00:02:09.054 --> 00:02:12.334
You know, once that time comes into retirement. So it's, it's critical,
00:02:12.634 --> 00:02:14.754
of course, that you're contributing enough.
00:02:14.974 --> 00:02:18.314
And we've had other episodes for that, but we're not going to dive too much
00:02:18.314 --> 00:02:22.594
into the contribution element, but also allocating properly. Right.
00:02:22.794 --> 00:02:27.554
So, so how does it work? I don't know. Like give me a quick brief work. Yeah. Really?
00:02:29.174 --> 00:02:33.894
Yeah. So one thing I will say in the 401ks is that every employer is different.
00:02:33.894 --> 00:02:38.994
And probably what Stu is saying in his instance is he's got a fund lineup.
00:02:39.054 --> 00:02:41.274
He's only got so many funds to pick from.
00:02:41.414 --> 00:02:46.274
And that's basically based upon the employer's decision on what funds they'll
00:02:46.274 --> 00:02:48.134
allow their employees to invest in.
00:02:48.687 --> 00:02:54.967
But generally speaking, most 401ks funnel participants in the two main allocation paths, right?
00:02:55.107 --> 00:03:00.067
You've got your target date retirement series path, or you've got your self-allocated.
00:03:00.527 --> 00:03:09.587
And in a normal situation, an investor comes to you, you need to spill to that.
00:03:10.167 --> 00:03:15.747
Exactly. Yeah, it's a customized portfolio. So typically, well,
00:03:15.947 --> 00:03:19.627
yeah, and actually, I'm starting to dive into that a little bit more.
00:03:19.707 --> 00:03:23.427
So when you've got the target date retirement series, those are your really
00:03:23.427 --> 00:03:25.927
one size fits all portfolios.
00:03:26.067 --> 00:03:32.067
And they range anywhere from 2025 to, in some cases, 2070 now almost.
00:03:32.247 --> 00:03:34.727
Oh, wow. And yeah, it's crazy.
00:03:35.087 --> 00:03:38.147
It's a bit of, like, fundamentally, they're all the same thing,
00:03:38.247 --> 00:03:44.207
Rob, right? So your target date retirement series that are 2070 or 2065,
00:03:44.527 --> 00:03:48.067
2060, those are your more aggressive funds.
00:03:48.907 --> 00:03:55.747
What is the date? Great question. So the date actually means your targeted date of retirement.
00:03:56.187 --> 00:03:59.347
So let's just say we're 30 years old right now.
00:03:59.547 --> 00:04:04.567
We expect to retire at 65. We want to pick something 35 years from now.
00:04:04.727 --> 00:04:09.467
So right now we're 25. That would bring us to 2060. is to target a retirement
00:04:09.467 --> 00:04:10.927
fund we would want to pick.
00:04:11.247 --> 00:04:14.667
So what if I want to retire and not be in those days again?
00:04:15.467 --> 00:04:19.207
Of course not. And that's where the lack of customization comes in.
00:04:19.647 --> 00:04:22.427
So we can't buy funds. Right.
00:04:22.927 --> 00:04:26.587
Yeah. Because life changes and we don't know exactly what we're going to be doing.
00:04:26.867 --> 00:04:31.627
And furthermore, what we dove into in former episodes is risk tolerance.
00:04:32.007 --> 00:04:38.627
You could be 20 years old and not have a AD risk tolerance, which is typically where those.
00:04:39.775 --> 00:04:44.735
Later target date retirement funds sit at it from a risk standpoint,
00:04:45.515 --> 00:04:51.195
whereas your 2030s, 2035s, it's closer to retirement, so they're generally more conservative.
00:04:51.515 --> 00:04:55.295
And they kind of sit on a risk scale of like 50, 60, somewhere around there.
00:04:55.395 --> 00:04:56.155
It depends on the manager.
00:04:56.795 --> 00:05:00.555
Either way, no matter how we look at it, with the target date retirement series
00:05:00.555 --> 00:05:04.495
funds, it's really a one-size-fits-all fund.
00:05:04.495 --> 00:05:08.515
So you're basically, instead of being a number, like your risk tolerance,
00:05:08.915 --> 00:05:12.175
that's really a portfolio based on that risk tolerance of one to one hundred.
00:05:12.455 --> 00:05:14.055
Right. Do you have one to a three?
00:05:14.475 --> 00:05:19.595
That's exactly right. Yeah. Yeah. So what do you suggest if,
00:05:20.155 --> 00:05:22.695
I guess, for me, right, around 30? Sure.
00:05:23.115 --> 00:05:27.755
What would you suggest if my two options were to sell if they're five years
00:05:27.755 --> 00:05:29.715
away or like 10 years away?
00:05:29.875 --> 00:05:35.315
Well, so it's just a good question, Rob. And I'll answer that by kind of countering it.
00:05:35.735 --> 00:05:38.075
I'll answer that question. I'm going to be quiet. Yeah, exactly.
00:05:38.435 --> 00:05:44.575
So that would maybe be enticing for you to go to the self-allocated portfolio.
00:05:45.215 --> 00:05:48.115
Oh, self-allocated. That's right. Remember how I mentioned earlier,
00:05:48.235 --> 00:05:49.695
funneling into two different paths?
00:05:49.775 --> 00:05:54.215
Yes, yes. So you've got your target date retirement series funds that are your one size fits all.
00:05:54.675 --> 00:05:58.015
Then you've got your self-allocated option. so that doesn't
00:05:58.015 --> 00:06:01.275
mean that you can go buy tesla stock or after stock
00:06:01.275 --> 00:06:04.435
of your 401k what it means is they typically give
00:06:04.435 --> 00:06:09.135
you and all employers are different but generally anywhere from 10 to 30 different
00:06:09.135 --> 00:06:13.975
funds to pick from ranging from anywhere from small to large cap companies both
00:06:13.975 --> 00:06:18.675
growth and value sector in the fixed income side we could see anywhere from
00:06:18.675 --> 00:06:22.215
short-term government securities to of long-term corporate securities.
00:06:22.735 --> 00:06:27.475
And so you can build your own portfolio. Now, there's a limited set of options,
00:06:27.475 --> 00:06:31.755
as we've said throughout the entire episode, but it still gives you accessibility
00:06:31.755 --> 00:06:33.555
to build a portfolio to you.
00:06:34.770 --> 00:06:41.210
The pros in that is, you know, could potentially be less expensive from an expense ratio standpoint.
00:06:41.590 --> 00:06:45.570
But then furthermore, you can actually target sectors in the market that you
00:06:45.570 --> 00:06:49.750
see as advantageous and build a portfolio to your risk.
00:06:50.610 --> 00:06:54.710
But like anything else, there's not automatic rebalancing with that stuff.
00:06:54.970 --> 00:06:59.130
So you add yourself a job as you're all. That's what I was saying.
00:06:59.490 --> 00:07:04.370
Yeah. Yeah. And that's exactly it. So now you're the manager that was formerly
00:07:04.370 --> 00:07:08.890
managing that, you know, institutional management target date retirement fund.
00:07:09.110 --> 00:07:11.170
You become that individual on it. Wow.
00:07:11.870 --> 00:07:16.790
That's a lot. Yeah, it is. And that's why you see so many people flowing to
00:07:16.790 --> 00:07:21.090
the target date retirement series. But it's important for me to educate the
00:07:21.090 --> 00:07:23.610
difference between the two. And then also, again.
00:07:24.354 --> 00:07:28.534
Return standpoint, the target day retirement funds are solid funds.
00:07:29.014 --> 00:07:33.614
I'm not bashing them by any means. They can build wealth for individuals.
00:07:33.874 --> 00:07:35.194
We've seen it plenty of times.
00:07:35.734 --> 00:07:38.674
To that same point, just understand that it's not customizable to you.
00:07:38.834 --> 00:07:42.274
Correct me if I'm wrong. What I see in our office a lot is that clients will
00:07:42.274 --> 00:07:45.894
have to get their target day because they don't want to go in there and manage
00:07:45.894 --> 00:07:47.554
all that. Very often, yes.
00:07:47.934 --> 00:07:53.474
And then they have their bigger bucket that is built specifically for them.
00:07:53.474 --> 00:07:55.994
All their risk tolerance, taking into consideration for family,
00:07:56.154 --> 00:07:59.874
their Medicare, their health care, all these other things they account for. Sure.
00:08:00.114 --> 00:08:06.674
And they end up rolling over that 401k eventually into that same bespoke custom plan. Yes.
00:08:07.174 --> 00:08:12.114
That's exactly right. Yeah. So at 59 and a half, and even sometimes as early
00:08:12.114 --> 00:08:18.714
as 55 and a half, we won't get into the weeds on that stuff in terms of rolling over assets from a 401k.
00:08:19.254 --> 00:08:23.074
But yeah, what we always see is, you know, hey, let's build the wealth.
00:08:23.474 --> 00:08:28.554
On both sides, right? Put away into a retirement account with work and then
00:08:28.554 --> 00:08:33.134
also either a retirement account or a taxable account with a professional management.
00:08:33.474 --> 00:08:38.014
And then once that time comes, 59 and a half, 60, maybe you wait a little bit
00:08:38.014 --> 00:08:40.474
longer to retire in your late 60s.
00:08:40.634 --> 00:08:44.194
Then in that instance, you just roll it into your world over IRA and.
00:08:44.754 --> 00:08:49.334
Get invested with institutional management with us, but also a lot more,
00:08:49.494 --> 00:08:53.154
as you said, bespoke, customizable, tailored beer, risk tolerance,
00:08:53.394 --> 00:08:57.334
risk mitigation strategies in there, retirement planning, of course.
00:08:57.534 --> 00:09:02.334
Yeah, that's good and interesting stuff because I know other jobs I've had,
00:09:02.474 --> 00:09:03.474
people are like, oh, what are you doing?
00:09:03.614 --> 00:09:05.974
I don't know, I picked this. Great, put me in it.
00:09:06.374 --> 00:09:11.454
And oftentimes, stick in it for years. Yeah, you don't need to talk. Oh, whatever.
00:09:11.774 --> 00:09:15.574
Right. You're looking to balance every couple of weeks, but you don't really worry about it.
00:09:15.754 --> 00:09:20.674
But it's... Give me the name and difference between the bank too, again.
00:09:21.154 --> 00:09:25.014
Sure. Those dollars. Yeah. So you've got target date retirement funds,
00:09:25.174 --> 00:09:28.474
which are really one size fits all funds.
00:09:28.814 --> 00:09:33.794
They've performed well for individuals in the past. They have a professional manager on top of them.
00:09:33.974 --> 00:09:38.054
And they're typically a little bit more on the expense ratio because of the
00:09:38.054 --> 00:09:41.214
fact that there is a manager handling all of that stuff. And then the other
00:09:41.214 --> 00:09:43.194
side of it is your self-allocated path.
00:09:43.314 --> 00:09:47.294
That's where you could pick anywhere from small to large gap growth or value
00:09:47.294 --> 00:09:52.614
funds and some international funds and even fixed income anywhere from short-term
00:09:52.614 --> 00:09:54.874
government securities to long-term corporate.
00:09:55.034 --> 00:09:58.814
So you've got a little bit more flexibility with those self-allocated funds,
00:09:58.854 --> 00:10:01.534
but you've got a lot more work associated with it too.
00:10:01.834 --> 00:10:05.974
So that's, I would say simple, you know, 30, 45 second answer.
00:10:06.394 --> 00:10:09.614
There it is right there. Amazing. Well, thank you, Stu. We hope that helps.
00:10:09.954 --> 00:10:12.734
You want to talk to any of our financial advisors here at Security Financial
00:10:12.734 --> 00:10:15.394
Management, interested in going over a 401A.
00:10:15.674 --> 00:10:18.654
I want to talk to Trevor, the man right here. We're going to leave a link in
00:10:18.654 --> 00:10:22.354
the description for you. And remember, folks, the secret to wealth is not what you're on.
00:10:22.634 --> 00:10:25.374
It's what you keep. What you keep. Happy days, everybody.
00:10:26.134 --> 00:10:31.034
This podcast is for entertainment and educational purposes only and is not intended
00:10:31.034 --> 00:10:32.834
as personal financial advice.
00:10:33.014 --> 00:10:36.994
Before making any financial decision, please do your own research and consult
00:10:36.994 --> 00:10:38.574
a financial advisor as needed.
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