In the 25 years I have been
in the financial consulting business one thing has remained true--clients want
to CUT expenses everywhere they can! And why not! After all, extra
expenses come out of your pocket which means that it really is YOUR money!
Today you'll learn a terrific
way to dramatically slash your 401(k) plan's expenses so that you can keep more
of your hard earned money.
Before we begin, let me
assure you that cutting expenses in your 401(k) plan is both practical and
necessary. It seems that everyone is discussing cutting these costs. In fact,
Congress is holding hearings on what to do about the myriad of very expensive
retirement plans that vendors are selling to plan sponsors.
Facts are facts; and the fact
is that most plans are far too expensive. So let's look at some very
specific and practical ways in which you can actually slash your plan's
expenses--beginning today.
Cost Cutting Idea #1 - Know
your numbers.
The first step is to know
what your current expenses are and to consider the possibility that your plan
may be too expensive to keep.
I know changing plans may
sound like too much effort, but let me encourage you to stay motivated by
thinking about the huge savings you'll get by cutting your plan's expenses. The
savings can be huge; more than enough to offset any time or effort you make
today.
Cost Cutting Idea #2 - Stop
paying for advice you don't need!
Paying for advice is another
big expense; especially, if you've been sold an expensive plan to begin with. Are you still paying someone
to advise you not to slash your plan's expenses? Why would you do that? Any
advisor worth his or her salt will want what is in your best interest, and
saving money is definitely in your best interest, isn't it?
Make sure the advice you
receive is in your best interest.
Cost Cutting Idea #3 - Beware
the high cost of "free."
Watch out for the myriad of
bells and whistles that vendors provide "free." If you look just
below the surface you will quickly see that "free" comes with a
considerable cost! For example, financial
calculators will waste your time and not provide any real value at all. The
reason is simple. First, they cannot predict which asset-classes will
outperform going forward. Second, they cannot predict how much you will earn on
your investments. They simply can't predict the future! But take heart, because you
can do a great job of planning your own investments without using financial calculators
and without using the financial planning software that may only confuse you
more. Always keep it simple.
Cost Cutting Idea #4 - Make
basic but profound changes.
Very simply, ask your
employer to use a diversified mix of low cost index funds instead of those high
cost funds that are in your plan. Did you know that two of the
biggest and most respected mutual fund companies in world only charge 0.07%,
per year for index funds? Imagine slashing your costs that low. It could mean
thousands, or more, to your bottom line each year! Another idea: For growth you
can use a large-cap blend, mid-cap blend, small-cap blend, and foreign large
cap fund that invest in equities (stocks). And for fixed income you can use a
Treasury money market fund, short-term Treasury bond fund, intermediate
Treasury bond fund, and a long term Treasury bond fund. (A long term Treasury
fund is optional: because it will has more risk but also more reward.) That's all you need for a
well diversified mix of investments!
Cost Cutting Idea #5 - Stop
trying to beat the market.
Let me ask you this. Can you
hit a moving target blindfolded?
Here is what I'm talking
about. Many people are trying to beat the market (hit a moving target)
blindfolded. They are blindfolded because no one can predict which asset
classes will outperform the others going forward. They are just guessing where
the target is. That's why they miss the mark. Instead, why not invest in a
diversified mix of low cost index funds so that you can match the market's
performance? That way you'll have more money for retirement and beat the picks
of most experts.
Did you know it's a myth that
you can predict the future by studying past performance? No one has ever done it!
Cost Cutting Idea #6 - Choose
your adviser carefully.
Many experts like to pretend
they know which asset classes will outperform all of the others, because they
want to sell you their asset-allocation models, or their asset-allocation fund,
target-date fund, lifecycle fund, lifestyle fund, or balanced fund. If you trust their advice,
you, too, will probably fail to beat the market. So why would you experiment
with your hard-earned money when you can easily match the market's performance
with low cost index funds?
The bottom line here is
simple, yet powerful. You can lower expenses and save time and money beginning today by taking the
simple steps outlined above. And I can guarantee this, use these ideas today
and you will be happy you did both today and for years to come!
Do you see how you, too, can apply these profitable tips in mere minutes? Easy! If you like these ideas, you can get more free tips at http://frankcirullo.com/blog/ Frank R. Cirullo is an author,
registered investment adviser (RIA), and a twenty-five year financial veteran.
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