Have a 401(k) Plan? It’s OK to Seek Help From Your Advisor!

Financial advisor and CERTIFIED FINANCIAL PLANNER™ Colin Day continues his series of videos and podcasts getting to know the people who help Correct Capital and our clients thrive. He recently sat down with podcast veteran John Biedenstein, who spoke about the results of a recent survey of Correct Capital’s 401(k) participants.

For recent investment news and our take on the current market, retirement planning, and investment, listen to our Podcast Capital Conversations or view our recent blog posts.

Below is the transcript of our most recent Capital Conversation podcast episode, “Have a 401(k) Plan? It’s OK to Seek Help From Your Advisor!”

Have a 401(k) Plan? It’s OK to Seek Help From Your Advisor!

Colin Day: Well, welcome everybody. Welcome to another edition of Capital Conversations. I'm Colin Day, Financial Advisor, CERTIFIED FINANCIAL PLANNER™, and with me again is John Biedenstein. He's a veteran of this podcast and video. Thanks so much for joining us again, John.

John Biedenstein: Thanks, Colin.

Colin Day: Today, we're going to change gears a little bit. For the past couple of weeks, we've taken it easy, maybe phoned it in a little bit, talking to different members of the team, just wanting you all that are watching or listening to this to understand – Hey, there's a whole team behind whoever's sitting in these chairs, say on maybe a biweekly basis, that can help you when you have questions or concerns, whether that's on your 401(k) plan or your individual wealth management needs. But, we want to get back to what this is really all about, which is talking about certain financial topics. And so, one of the things that we were afforded the ability to do last week was talk in front of a group of business owners about 401(k) plans, maybe being a little bit more creative about 401(k) plans.

For the past two years, we've done a survey of our participants in our 401(k)s. Just asking the basic questions of: “How do you feel? How are things working in your 401(k) plan? What do you need from us? What do you need from an education perspective?” And, with that survey, we created a one-sheet which tracks the six biggest ideas that we took from that. Ideas that we feel are important for business owners, or for people that work in HR, or payroll to know about their retirement plan. If you're interested, you can always email us, and we’ll be happy to send you a copy of it.

We're going to talk about the number one thing today, and maybe in future iterations I'll invite John back again and we'll talk about more of them, but the big one that we came across was just the fact that participants in our plans need help. That's why we're advisors in the first place, is to help people. And we are finally seeing an uptick in the number of people that are looking for financial advising, for that kind of help. So we had a question that was: “Within the next 12 months, do you plan to engage with a financial advisor for assistance?” And it's on a scale, 1 to 5. It's a very rudimentary survey that we do here. One means basically, “No, I don't plan on doing anything at all,” and five is, “Absolutely, I will.” The most common answer on the survey was five – “absolutely.” And that answer of “absolutely” was up 8 percent from 2021. So John, why are people suddenly answering “absolutely?” And why is that number even higher than what we saw in last year’s survey?

John Biedenstein: Well, I think, number one – it's the high inflation and the market volatility we’re seeing. People are concerned to see their retirement balances, their life savings in some cases, going down when they're expected to retire in 5, 10, 15 years. If you're retiring in five years, it's a bigger concern, versus 15 or so out. The other thing is you have a large number of Baby Boomers that are soon to be retiring, and maybe they want to continue working. They start seeing these numbers and they look at that retirement balance, the way the balance is set today, and look at lifetime income numbers and look at their social security balances. They start saying, “Hey, will I have enough? What's my game plan?” So part of that game plan is talking to your financial advisor in getting a plan in place and going through that. Looking to see, do you need to make a change? Do you move to a safe haven, or do you want to continue to ride this a little bit? History has shown that, over time, these inflationary trends we're seeing go away and market performance returns to what we've seen over the last two or three years, not what we've seen in the last 12 months.

Colin Day: I think that's very true, when you say that people are this close to retirement and the dollar amounts in their retirement account are suddenly becoming a lot more real, something else that's coming out on statements is lifetime income amounts. I think it was a couple years ago where record keepers on retirement plans have to have some kind of illustration of what amount you might be able to withdraw at a particular retirement age. And, seeing that number and comparing them quarter by quarter, when one quarter you were up and the next one you were down, suddenly that money, which has been phantom dollars – paper losses, let's say – are suddenly becoming real. So those types of folks are suddenly realizing: “The amount that I thought I needed to be able to survive on retirement is not going to be fulfilled between my social security, a pension – if available – and my 401(k).” Suddenly, that fear becomes the reason why they want to engage with an advisor.

John Biedenstein: Right. Also, even people that are retired and maybe you are withdrawing from your 401(k) or IRA. We always meet with people and we want to make sure people have three buckets of assets, and they pull out of those three buckets of assets as needed. Well, it might be a good time to be using more of those outside-of-retirement-plan assets that might be more shorter term in nature and less volatile in regards to the up-and-downs of the market. Use those resources or use those funds now and kind of delay taking the retirement distribution for a period of time. So that's where the advisor can help you to say, “Let's look ahead here. Let's see what your income needs are, what your expense needs are, I should say, and if we need to make adjustments, we can help you there.”

Colin Day: That's very true, especially with those folks that are looking at the 401(k) as their massive asset, so to speak, as to where they're going to be able to take care of their variable expenses. Because even if they're on social security or they have a pension payment, well those are going to come at the same time every single month for the rest of your life. There's very little variability; maybe there's cost of living adjustments. But with the 401(k) plan, it's all about withdrawing at the right times making sure that you have a plan in place and you're being intentional as to how you're using those funds. So having cash in retirement is generally king, except for times when interest rates are what they are, and inflation is what it is. Because when there's nowhere to hide – in a year where stocks are going to be down, bonds are going to be down – the last bastion that you might want to put your funds into might be something in cash. But again, unless you're getting some kind of guaranteed rate that is incredibly high, like 1980s high, you're going to be losing money. Because inflation is going to be annualized somewhere around let's say 6 percent this year, you’re not going to find a vehicle that's going to be able to do that. So it is being productive with your funds to say, “Maybe I'm taking my cash and doing something else with this. I don't know exactly how my 401(k) plan works, because I can know what I can do over here in my cash because this is money that I have available to me, this is tangible. But the kind of amorphous, the kind of “in the cloud” money that's out there, it's just a little bit harder to know exactly what to do with that.”

John Biedenstein: Colin, you mentioned an individual that might have a stock position, whether it's an ESOP (Employee Stock Ownership Plan), a company owned stock, or something like that. What are your thoughts on things that they should be thinking about right now?

Colin Day: This might be a good time to try to reevaluate your position, especially if it's a heavy position in company stock. So many of our clients do have company stock, either in their retirement plan or in outside resources.

While they want to be essentially providing for their employer in a way, in saying that, “Hey, I believe in our company and where we're heading and so thus I'm going to invest in it.” But having a highly concentrated position is one where it might make you feel a little bit uneasy. You might have stock options that are vesting and you're wondering, “Do I maintain these? Do I sell these? If I sell these, what are the tax implications?” Especially on the growth side, like the tech sector side, those particular clients might be more concerned about performance and where things are going in the future. Now is a great time to engage with somebody to give some kind of professional opinion, or at least an outside opinion, to maybe what you're hearing internally within your firm. So this is all to say that with our survey results, this is exactly why we do this, because to better serve our clients and our 401(k) plans, we have to have this kind of information. This information then allows us to go to plan representatives and say, “Hey, we have to be out there. We have to have conversations.” If you're working with an advisor on your retirement plan, make sure that your advisor is one that's providing things like fiduciary advice, make sure that they are willing to do education that is specific to the employee base. If your employees are 20- and 30-year-olds, they probably don't want to hear about Social Security. We need to make sure that we're addressing their concerns. And sometimes it is, “Hey, I've never had stock options before. What am I supposed to do with this?” On the other side of the spectrum, from the career spectrum, it could be, “Hey, I am a lot closer to retirement. How do I convert these funds into something that is going to last me for the next 30 years in retirement.” Just making sure that people feel very comfortable in their decisions, whatever they might be.

So, John, parting words, what are your thoughts in regards to how necessary advice will be going forward in 2023?

John Biedenstein: I think we're going to see a continued need to assist participants, assist individuals in planning. So, having a resource for you whether you are a plan participant or a client. If you're a planned participant, we're a free resource. If you're a client, you're paying for that assistance and help that we provide to you. So, take advantage of it. I think the volatility is going to continue on for a period of time, so there might be things that you want to kind of plan through.

Colin Day: Again, if you're interested in learning a little bit more about our survey results: info@correctcap.com is the email address. We'll be happy to send you a copy. So for John Biedenstein, I'm Colin Day. Thanks so much for joining us.

John Biedenstein: Thank you.

The opinions expressed in this program are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Correct Capital Wealth Management is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Correct Capital Wealth Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Correct Capital Wealth Management unless a client service agreement is in place.