ADP Retirement Services Information Portal

Tapping the Experts: The Value of Advice

Retirement planning may not always be difficult, but your options can sometimes become difficult and confusing to sort through on your own. Fortunately, participants in an ADP 401(k) Retirement Plan may have access to advisor tools and online resources to help make decisions that are right for them.

For example, a 2011 study showed that plan participants who received some sort of outside help have earned higher returns than those handling their own investment choices—up by 2.92% a year.1 Having access to an advisor or online help not only may save you time, but it could also prevent you from making bad decisions, such as pulling money out of the market during steep declines and then failing to get back in during recoveries. Your employer may make available to you advice that offers unbiased guidance on investment options that may best meet your objectives and risk tolerance, impose rebalancing discipline, and spur you to take action if you haven’t made any changes to your plan in a while.

A financial advisor is equally valuable when it’s time to transition out of your plan when you retire or change jobs. Whether you are considering a rollover IRA that provides what your present plan lacks, a recommendation to stay in your plan, or rollover to another employer plan, as applicable—their advice can help you decide which distribution option is best for you.

Participants should be aware that financial advisors charge fees or commissions for their services and mutual funds (including target-date funds) and managed accounts also have fees and charges associated with them. If you prefer to manage your account yourself, there are a host of online calculators and worksheets available from plan providers and many other sources.

1. Aon Hewitt and Financial Engines study of 425,000 plan participants, in eight large 401(k) plans, who used target date funds, professionally managed accounts, or online help between January 1, 2006, and December 31, 2010.

More Help = Potentially Better Returns
Let’s suppose Steve and Charlene both invest $10,000 in their retirement plan at age 45. Steve likes to make investment decisions on his own, while Charlene gets advice from a financial advisor and online resources. A 2011 Financial Engines/Aon Hewitt study shows that Charlene, who uses advice, earns 2.92% more a year on average in her account than Steve ($71,400 versus $42,100, respectively).

By seeking help, Charlene potentially earns 70% more in her account by the time she retires at 65 than Steve, who prefers to make his own investment decisions.

Assumptions: Both Steve and Charlene invest a lump sum of $10,000 on their 45th birthday. They make no additional contributions, but their portfolios grow at median annual rates such that Charlene earns 2.92% more a year than Steve over 20 years, net of fees. This hypothetical example is not intended to depict the performance of any investment. All investing carries risk, including risk of loss. Individual results will vary. For a more detailed explanation of how this hypothetical example was constructed, please see “Help in Defined Contribution Plans: 2006 Through 2011,” Financial Engines and Aon Hewitt, September 2011, pp. 10, 46.

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