There’s a growing trend among new retirees. With increasing frequency, Americans are choosing to leave their retirement savings. According to data from Fidelity, 55% of workers leave their retirement savings in their former employer’s 401(k) plan for a full year after retirement. That’s up from 45% just four years ago.1
 
Why are retirees leaving their assets in their old 401(k) rather than rolling those funds to an IRA? There could be a variety of reasons. Workers may be happy with the plan’s investment options and administration. They may feel comfortable with the plan’s online access and other management tools. They might not need the money immediately, so they don’t have urgency to do anything with it. It’s also possible that some retirees may not be aware that they can roll their funds into an IRA tax-free.
 
While there are certainly benefits to keeping your assets in your employer’s 401(k), there are also good reasons to roll the assets into an IRA. If you’re approaching retirement, now is the time to consider your options for your 401(k), which may be your largest retirement asset. Below are a few factors to consider:

Investment Options 

If you’ve been in your 401(k) plan for a significant amount of time, you are likely familiar with the plan’s investment options. You may feel comfortable with your allocation and perhaps you even like the plan’s fee structure and performance.
 
However, your goals and risk tolerance won’t always be the same as they are today. Just as your investment strategy has evolved through your career, it will likely continue to evolve through retirement. What you’re comfortable with today may not be something you’re comfortable with in the future.
 
Generally, IRAs offer significantly more investment options than most 401(k) plans. That’s not necessarily true with every IRA and 401(k), but it is often the case. While a 401(k) plan may offer dozens of options from select providers, an IRA will often allow you to choose from a wide universe of stocks, bonds, mutual funds, ETFs, Alternatives, options, annuities, and more. That greater diversity of options can help you develop an allocation that is just right for your goals and risk tolerance, no matter how it changes in the future.
 
Management and Administration 

You also may be comfortable with your 401(k) plan’s management and administration tools. Perhaps the website is easy to use. Maybe you have a dedicated support person within the plan administrator’s office. You know how to make changes and review your account, and you may not want to make changes at this time.
 
Again, though, consider whether it will still be convenient in the future to keep your assets in your old 401(k). If you’re like many retirees, you may have multiple 401(k) plans from old employers. You also might have IRAs and other investment accounts. It’s difficult to manage and adjust your strategy when you have accounts spread across multiple custodians and institutions. You may also have the unintended consequence of overlapping investments that may affect your risk mitigation without realizing it. 
 
Also, when you reach 72, you’ll have to take required minimum distributions (RMDs) from your 401(k) and IRA. Again, that process may be inconvenient if you have to pull distributions from multiple accounts.
 
Many of these issues may be resolved by consolidating your qualified retirement assets into one IRA.  Once you consolidate your qualified assets into one IRA, you simply have to manage the investment option of one account. It will also make managing your RMD calculations and withdrawals a much easier process and may potentially eliminate missed RMDs mistakes.

Income Protection 

While you may not need to tap into your 401(k) assets today, it’s possible that at some point in the future you will need to take withdrawals from your retirement savings. Of course, it’s difficult to know how much you can safely take in a withdrawal each year. What if you live longer than you anticipate? What if the market takes a downward turn? How can you be sure your assets and income will last for life?
 
If you are concerned about the possibility of running out of money during your lifetime, you can use financial vehicles like annuities to convert a portion of your savings into guaranteed* income. These vehicles are available in most IRAs and provide you with a regular consistent check that is guaranteed* for life, no matter how long you live or how the markets perform.
 
Historically, annuities with guaranteed income benefits have been more available in IRAs than in 401(k) plans. However, the passage of a new law, called the SECURE Act, creates the possibility for 401(k) plans to start offering these vehicles. Whether it’s through your IRA or 401(k), guaranteed income could give you a base level of financial stability confidence in retirement.
 
Ready to implement a plan for your 401(k) assets? Let’s talk about it. Contact us today at Emerald Blue Advisors. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
 
1https://www.marketwatch.com/story/more-americans-are-leaving-their-money-in-401k-plans-after-retirement-should-you-2019-10-31
 
Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
19563 - 2019/12/16

For decades, some of the world’s largest institutional investors have used one tool to guide their decision-making. Mutual funds, educational endowments, defined benefit pensions, and more all use this document to focus on their long-term goals and select only the investments that meet their specific criteria. It’s an investment policy statement (IPS).
 
An IPS isn’t just for institutional investors though. Individuals are now often using their own IPS to set long-term strategy and develop a formal process for choosing investments. While the format of an IPS can vary, most involve the following elements:1

• Goals - A description of the purpose of the investment and the investor’s specific objectives.
• Risks - The various risks that may threaten the strategy and a statement about the maximum acceptable risk that the investor is willing to accept.
• Strategy - A description of the portfolio strategy and target allocation.
• Current Investments - A list of all current assets and investments that are covered by the IPS.
• Selection Criteria - The criteria that an investment must meet to be included in the strategy. The criteria could be based on past return, volatility, expense ratios, and more.
• Monitoring Policy - A description of how the strategy will be monitored. When will reviews take place? When will the portfolio be rebalanced? What would need to happen to trigger a change in policy?

 
 
Do you need an IPS? It could be a valuable tool to help you maintain a long-term strategy and stick with a consistent investment approach. Below are a few ways in which you might benefit from an IPS:

It helps you avoid emotional decisions. 

The average equity investor routinely underperforms the S&P 500 index. In fact, over the past 30 years, the average investor has had a 3.98% average annual return. The S&P 500 has averaged more than 10% annually over that same period.2
 
Why do investors underperform the market? There are many reasons but one of the biggest is that investors change their strategy based on emotional decisions and short-term impulses.
 
For example, you may get out of the equity markets if they take a downward turn. However, by the time the market has improved, you’ve already missed much of the recovery. These kinds of decisions cost investors return over the long-term.
 
An IPS helps you avoid short-term impulse decisions because all of your actions are guided by the document. If a change or adjustment isn’t specified in the IPS, you don’t make it. In many ways, an IPS protects you from yourself.

It clarifies risk. 

What is your risk tolerance? Don’t know? You’re not alone. Unfortunately, many investors jump right into their strategy without considering their own tolerance for risk. That often leads to an allocation that isn’t right for their needs and goals.
 
Risk tolerance is an important component in IPS. Before you can establish your long-term strategy, you have to define the specific levels of risk that are or are not acceptable to you. You then develop an allocation that aligns with your acceptable level of risk. Without an IPS, you might choose an allocation that has far more potential for risk than is right for you.
 
Ready to create your own IPS? We can help. Contact us today Emerald Blue Advisors. We can help you document your goals, clarify your risk tolerance, and create a comprehensive policy that keeps you focused on the long-term.
 
1https://www.morningstar.com/articles/808692/how-to-create-an-investment-policy-statement
2https://www.marketwatch.com/story/americans-are-still-terrible-at-investing-annual-study-once-again-shows-2017-10-19
 
Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
19564 - 2019/12/16

It may be February but resolutions are still in full swing.  Resolutions have been around as long as New Year’s itself. The first known mention of the phrase, “New Year’s resolution” was in a Boston newspaper in 1813. However, even 4,000 years ago, ancient Babylonians were making their own form of New Year’s resolutions by vowing to the gods to pay their debts in the upcoming year.1
 
There have been other unusual resolutions throughout history. In 1669, author Jonathan Swift made a resolution to “not be fond of children.” Mathematician Godrey Hardy made a resolution in the 1930s to be the first man to climb Mt. Everest and to become the combined president of the USSR, Germany, and Great Britain. That would have been quite the year!2
 
Of course, not all resolutions are optimistic. In 1984, The Times asked author Samuel Beckett about his resolutions for the upcoming year. He answered that he had no resolutions because he had no hopes.2
 
Some of the more common resolutions are things like losing weight or dropping a bad habit. If you stick with your resolution, it can have a profound impact on your future. That’s especially true with financial resolutions. Below are a few financial resolutions that could significantly improve your retirement strategy:

Increase your retirement contributions. 

Saving more money for retirement is always a good idea. A qualified retirement account like your 401(k) or IRA could be an effective vehicle for those savings. Qualified accounts are tax-deferred. That means you don’t pay taxes on growth as long as the money stays in the plan. That tax-deferral could help your assets compound at a faster rate than they would in a comparable taxable vehicle.
 
In 2020, you can contribute up to $19,500 to a 401(k) plan, plus an additional $6,500 if you are 50 or older. You can also contribute up to $6,000 to an IRA, plus an additional $1,000 if you are 50 or older.3
 
Of course, you may not be able to afford to contribute $19,500 to your 401(k). Instead, make gradual increases over time. In 2020, try raising your contribution by 1%. That likely won’t put a dent in your budget, but it could have a big impact over time. You could even set your contributions to automatically increase by 1% at regular intervals, perhaps every January 1. Before you know it, you’ll be contributing the maximum amount.

Reduce your risk exposure. 

Do you get more anxious than you used to when the market experiences volatility? Are you more concerned with risk and loss than you were in your younger days? That’s natural. Many people become more risk-averse as they approach retirement.
 
When’s the last time you actually reviewed your investments to make sure they align with your current risk tolerance? Many people set their 401(k) or IRA allocation and forget it. The result is that it never changes over time and becomes out of alignment with their goals and needs.
 
Take some time in 2020 to review your approach. It may be time for you to move to a more conservative allocation with less risk exposure. Or you may benefit from retirement vehicles like fixed or fixed indexed annuities that don’t have downside market risk exposure.

Work with a professional. 

Are you a do-it-yourselfer when it comes to saving for retirement? There is no shortage of apps, tools, and technology to help you manage your retirement income without the help of a professional.
 
However, there are still important benefits to working with a professional. An experienced financial and/or retirement professional can help you prioritize your goals and identify gaps in your plan. They can recommend strategies and implement a plan to help you achieve your biggest financial and retirement income goals.
 
If you aren’t currently working with a financial professional, consider meeting with a few in 2020 and seeing if any of them align with your needs and goals. In fact, let’s start the conversation today. Contact us at Emerald Blue Advisors. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
 
1https://www.bustle.com/articles/197291-the-history-of-new-years-resolutions-why-we-started-making-them-in-the-first-place
2https://www.bustle.com/p/the-strangest-new-years-resolutions-from-history-27386
3https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500
 
Investment advisory services are offered through Emerald Blue Advisors, Inc., a registered investment adviser offering advisory services in the State of California and other jurisdictions where registered or exempted. This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwise permitted. Nothing in this document is intended as legal, accounting, or tax advice, and is for informational purposes only.
 
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
19536 - 2019/12/10