Markets are known to be volatile and will continue to change rapidly in unpredictable ways. This may be a concern to many people, but let me reassure you that it is okay. In fact, this may be used to your advantage as it may give long-term investors an opportunity to rebalance into investments. I have assembled a list to review if you are worried about your investments in your 401K (or outside your 401K).

  1. Conservative Investing: Bonds have had a terrible year as rates have risen. For most investors (anyone more than 7-10 years before retirement), bonds may not provide the growth needed overtime to make your 401K a powerful asset in retirement.
  2. If your 401K has a lot of bonds (fixed income/conservative), you may consider rebalancing into equities.
  3. Index Funds vs. Active Funds: A lot has been made about index funds with the key characteristics being low cost and tax efficiency, which is great. However, in your 401K, these characteristics have a lower value than in non-retirement accounts. Mutual funds in retirement plans are negotiated to have lower investment costs than retail and there is no tax efficiency value in retirement accounts as you do not owe any taxes until you withdraw your funds.
  4. Consider reallocating from index funds to mutual funds for active management.
  5. The Power of ROTH Compels You: As a reminder, a ROTH 401K is the most powerful retirement tool available and is accessible to everyone. Money goes in taxed and comes out tax-free, resulting in no tax on growth. Combine that with equity investments that may be on sale and you will have the best possible outcome.
  6. Consider changing at least a portion of your contribution from tax-deferred to ROTH, especially if you are younger.

Past performance is not indicative of future growth. Investing may have risks, including loss of principal. There are also risks in NOT investing in growth, which may include not keeping up with inflation and losing real value of your investments. Consider all risks carefully.

If you have any questions, please contact me and I’ll try to answer any questions you may have. We will have a more comprehensive 401K meeting later this year.

Philip Clark, CPWA®, CFP®, CLU® | Director – Wealth Management

Direct: (626) 788-3947 | [email protected] | Connect with me on LinkedIn


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This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 05/10/2021 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.

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