Deciding how to invest 401(k) plan savings can be challenging and intimidating. Doing it right requires understanding different 401(k) investments and strategies, as well as having the time to track performance and make changes. Fortunately, participants in a 401(k) plan have several options for guidance and advice. One such option is a managed account, which provides participants access to a personally constructed portfolio and professional guidance from a qualified investment advisor.
What is a 401(k) managed account?
A managed account features two key components:
1 Professional guidance from an investment advisor to help the participant develop a financial plan based on their unique circumstances, and
2 A customized portfolio of investment options chosen from the plan’s lineup and personalized to the participant’s financial plan and investment preferences.
Although managed accounts do charge a fee, they come with important benefits that can help drive retirement readiness. Whereas many participants may choose their 401(k) plan investments and then forget about them, investments in managed accounts are professionally managed and monitored.
Managed account portfolios are personalized to the objectives of each participant and monitored daily to ensure the participant is making progress toward achieving retirement readiness. Managed account portfolios are also rebalanced regularly to maintain an optimal mix of investments and can be reallocated across investment options based on a participant’s age or a change in their financial situation. Some managed accounts also feature automatic annual contribution increases to help keep savings rates on track to meet participants' retirement readiness goals.¹
Retirement savings beyond the plan
Managed accounts consider a participant’s other retirement savings and income sources, outside the 401(k) plan, to determine the optimum contribution amount. External income sources can include Social Security, other retirement and savings accounts, and assets held by a spouse. By taking into account the participant’s overall financial picture, a managed account portfolio becomes even more individualized to the 401(k) plan participant. This holistic view means that the portfolio can better target the right 401(k) investment mix in the overall portfolio.
Why choose a 401(k) managed account?
Managed accounts can be a good option for 401(k) participants who want advice on how much to save for retirement and how to invest their savings. With the professional guidance of a qualified investment advisor, a managed account helps the participant develop a personal financial strategy and then regularly monitors and rebalances 401(k) investments to keep the strategy on track.
The professional attention and personalization of a managed account can provide additional support for:
- 401(k) participants who aren't on track for retirement
- Preretirees who need a customized 401(k) investment plan to handle the transition from saving for retirement to withdrawing their money in retirement
- Participants with other assets, including spousal assets, outside the 401(k) plan
Managed accounts are also a sensible option for 401(k) participants who simply need peace of mind that their retirement savings are being professionally managed toward their personal goals.
1 Investing involves risk, including the loss of principal. As such, participation in a managed account does not guarantee investment success.
This content is for general information only and is believed to be accurate and reliable as of posting date but may be subject to change. John Hancock does not provide investment, tax, or legal advice. Please consult your own independent advisor as to any investment, tax, or legal statements made herein.
There is no guarantee that any investment strategy will achieve its objectives.
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