What are managed accounts?

A managed account is a professionally managed investment account where a financial advisor, an automated platform, or a combination of both makes investment decisions on your behalf, tailored to your financial goals, risk tolerance, and projected retirement needs. 

• A fully automated managed account is a computer-generated program that uses digital portfolio management tools, algorithms, and your own personal data to manage your money without human interaction.
• Managed accounts charge a fee for their services, usually calculated as a percentage of your account balance. 
• Fully automated accounts have the lowest fees, while those that combine automation and human interaction with a registered investment adviser generally cost more.
• About half of employer-sponsored retirement plans, such as 401(k)s, offer a managed account option for their plan participants.²

When you enroll in a managed account through your 401(k), your personal information, including your age, years until retirement, current balance, current savings, and estimated Social Security benefits, is used to create a customized investment and savings strategy just for you. The more details you share, the more customized your strategy becomes. 

How can they manage market volatility? 

Managed accounts may use several strategies to help reduce the potential impact of market volatility on your retirement investments in the long run. The below focuses on how automated managed accounts work.

Create personalized retirement investment strategies

Automated managed accounts consider your risk tolerance, savings goals, age, anticipated retirement date, and other information you provide to develop a personalized retirement investment strategy just for you. This strategy helps guide digital, professional portfolio management tools in selecting a customized mix of investments from your plan’s available options.

Your portfolio is monitored, reviewed, and adjusted regularly to help keep your investments aligned with the goals you’ve set. For your part, simply keep your personal and financial information up to date. The automated engine will adjust your investments, as needed, should markets shift or your lifestyle changes.  

Provide downside risk protection 

Downside risk protection means protecting your account from potential losses, which becomes more important the closer you get to retirement. Two common strategies used are:

1 Asset allocation—These strategies determine how your money is divided into different types of investments known as asset classes, which are usually stocks, bonds, and cash in 401(k) accounts. Each asset class has the potential for losses (risk) and gains (return) on your investments. Stocks have the potential for higher returns but with greater risk, while bonds may provide lower and more stable returns with relatively less risk. Managed accounts automatically adjust (or reallocate) the amount you have invested in each asset class, usually quarterly and/or annually. As you age, your portfolio may gradually be reallocated to more bonds than stocks. This strategy may help reduce your overall risk and preserve your balance as you get closer to retirement and begin making withdrawals.

2 Diversification—Diversification³ refers to the variety of individual investments within and across each asset class. Managed accounts generally choose a broad range of investments, such as stocks, bonds, and mutual funds, with different investment styles and strategies; for example, you might be invested in an international mutual fund as well as a U.S.-based one. The idea is that if one investment declines in value, the others may still perform well to help reduce your overall risk and minimize your potential losses.

Help prevent emotional trading

Watching the value of your retirement savings go down may lead you to make an emotional decision, such as selling off your investments before they’ve had a chance to go back up in value. Since fully automated managed accounts rely on algorithms and preset strategies tailored just for you, your investments won’t be subject to impulsive decisions. Your portfolio adjusts automatically to help keep your investments aligned with your long-term goals, even when markets are volatile.

Reasons to consider a managed account

Managed accounts choose your investments for you, provide ongoing monitoring and regular portfolio adjustments, and may offer personalized guidance to help you save for the retirement you want. While they can help navigate your portfolio through market ups and downs, managed accounts may also be a good approach if you: 

• Have more complex financial circumstances, including other retirement savings and investment accounts, in addition to your 401(k)
• Are nearing retirement age and want recommendations on when and how much to withdraw from your retirement accounts each year in retirement
• Want a personalized and professionally managed retirement account at a price that may only be available through your 401(k) plan
• Are unsure about making investment decisions on your own
• Don't have time to manage your 401(k) yourself

Managed accounts can differ in their features, fees, and the services they offer. When considering a managed account, be sure to carefully review its investment advisory agreement and any related disclosures. These documents outline the specific terms, conditions, and responsibilities associated with the service they provide and can help you make an informed decision based on your personal and financial situation.

1 “Judge me on my losers: Do robo-advisors outperform human investors during the COVID-19 financial market crash?” Production and Operations Management, 2023. 2 “2024 Defined Contribution Plan Trends and Fees Report,” NEPC, March 2025. 3 Neither asset allocation nor diversification guarantee a profit or protect against a loss. Past performance is not a guarantee of future results. Investing involves risks, including the potential loss of principal. As such, participation in a managed account does not guarantee investment success.