1. Calm Down

If you’re scared of investing, understand that this is quite common, but also unnecessary. It’s true that you don’t want to jump into investing without any preparation. But what happens too often is that potential investors become overwhelmed when they consider the enormity of learning about investment strategies, and this paralyzes them and prevents them from moving forward. We would almost be so bold as to suggest that such a scenario is worse than making decisions blindly.

Rest assured that if there was one specific way to invest correctly, everyone would have done it by now and they would be rich. But only some people are rich, and their investments are often not why.

Trust yourself. Start small and vow to make slow and steady progress. Once you begin to understand more and see the fruits of your labors, you will gain the confidence you need to continue.

2. Use Proven Models

A 401(k) is considered superior to an IRA because it allows you to save so much more money. The employee contribution limit for a 401(k) in 2024 is $23,000. The limit for an IRA is $7,000. The downside is that a 401(k) often doesn’t allow you many choices. Sometimes your choices are limited to what percentage of your contributions you want to allocate to the three main areas of investments — stocks, bonds and cash investments.

Many timid investors find this not a drawback, but a plus — no big decisions to make! And we get it. It works for some people. If this is how your company’s 401(k) works, just know that you have the option of opening your own IRA that will allow you more flexibility in choosing what you want to invest in. Take some time to read up on not just stocks that perform well, but might also tie into your interests, such as sustainable agriculture, technology or business.

Regardless of how much choice you are allowed with your retirement portfolio, it’s easy to find pie charts and standard recommendations on what percentage of your contributions you want to allocate to specific types of investments based on your age and risk tolerance.

For instance, experts recommend that younger investors allocate more of their contributions to stocks than older investors. As time goes on, you may want to put more money into a bond ladder, which provides income over time as each bond reaches maturity. Experts further recommend that as you approach retirement, you keep enough cash on hand to cover a year’s worth of expenses, and two to four years’ worth of expenses in short-term accounts. That’s because you want your money to still work for you, but you want to be able to access enough in the event of a downturn. Most downturns don’t last beyond four years, hence the recommendation.

3. Make a Roadmap for Retirement

If you’re in your 20s or 30s, retirement may seem like it is still far off. And by some yardsticks of measurement, it is. But hopefully you have seen some charts showing how important it is to start investing early, even if you don’t have as much to invest. In the early stages of investment, it may be difficult to tell how much you will need to save for your retirement. There are mathematical models, to be sure, that give you some numbers based mainly on your age, but also on a few other factors. They are hardly individual, however. Some factors to consider when you’re planning for your retirement include:

• How much will you collect in Social Security? This number can be affected by not only a change in income, but also a change in marital status or the age at which you choose to retire.
• Do you have a pension? Most workplaces don’t provide pensions anymore, but if you’re in a government career such as teaching or public safety, you may still get a pension.
• Will you work in retirement? Many people imagine they will travel extensively or just relax in retirement, but both of these can get boring. A place to go every day and a little money in your pocket during retirement can make a difference.
• Do you expect to share expenses with a partner? Most often this is a spouse, but it can be a family member or another person who splits living expenses with you.

4. Approach Investing as if It’s Fun (It Is!)

You may see the value of your investments rise and fall over the years, and world events can affect this, including war, famine, weather, global pandemics and more. But investing isn’t like poker or a horse race, so there is no need to panic at the thought of losing a lot of money. As long as you diversify (don’t put all your eggs in one basket!), you should be fine. It’s satisfying — at any age — to watch your money grow and to know that you’re doing important work to take care of yourself and your family in your golden years.

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This is good news for investors, and it’s good news for financial advisors as well, since studies show that more than 90% of investors go along with this default option and its algorithms, demonstrating their indifference or reluctance to managing their own financial investments. What do you — and your clients — need to know about how target-date funds serve investors, and how you can help them leverage the advantages these funds have come to offer?

Basic vs. Custom

TDFs are convenient for both participants and plan sponsors because they require little effort on anyone’s part, and they work. But how well do they work? Oftentimes they work well enough, but it’s a fact that a participant’s retirement nest egg could be feathered more luxuriously if they — or their financial advisor — had taken an interest in tailoring the funds according to the individual’s personal goals rather than merely their retirement age.

While it is legitimate for an algorithm to decide, based on a participant’s age, how much they will need in retirement, financial advisors know there are thousands of other factors to consider, including:

• Is the participant married and if so, does their spouse work and contribute to their own 401(k)?
• Is the spouse significantly younger (i.e., has more potential years to earn money)?
• Are there any health concerns on the horizon?
• Does the participant have other retirement vehicles such as a personal IRA or other assets such as a home, vacation home, investment property, business, stocks, jewels, a stockpile of rare beanie babies, etc.?
• What is the participant’s expected lifestyle in retirement? Will they live as they do now, or do they expect to move, downsize, travel extensively or make another major life change?
• Will the participant have substantial expenses in retirement such as paying for eldercare for themselves or their parents, tuition for themselves or their children, weddings, funerals, etc.?
• Does the participant have a large mortgage or a lot of debt to pay down?

The answers to the above questions could impact the level of retirement funds necessary by hundreds of thousands of dollars.

Help with Portfolio Design

Here at 401GO, we offer the services of an automated portfolio builder to help participants better tailor their investments to their needs and preferences. This tool is particularly helpful to participants who work with us because we offer so many more options — more than 100. This level of choice can feel overwhelming to some, which is one reason we created our automated portfolio builder — as a way for investors to participate in their retirement fund choices without feeling overload.

But the automated portfolio builder isn’t for everyone. Many plan participants are happy with their company’s TDF and the algorithm’s management and see no reason to tinker with it. It’s a great hands-off default for those who don’t want to give their retirement much thought.

Others desire more than our automated portfolio builder provides — the personal touch of a real live financial advisor. By talking to 401(k) plan participants personally, learning their goals, determining their tolerance for risk and factoring in other considerations, you can help craft a specific retirement plan just for them.

Important Changes to TDFs

You may be aware that TDFs used to come with fairly steep fees that could impact participants’ gains, but that is no longer necessarily the case, despite the fact that 70% of the TDFs are controlled by just three players — Fidelity, Vanguard and T. Rowe Price. Greater transparency, improved service and competitive fees have grown with the popularity of TDFs, making them more attractive to businesses across the U.S. Still, it can be worth it to your clients to see what some of the smaller players in the game have to offer as well.

The Future of TDF Management

While inflation, interest rates and other factors also have an impact on TDFs and how they are managed, these moving parts are what financial advisors and anyone in finance understands is simply part of the job of overseeing investment accounts.

When you’re working with small businesses, their employees or individual clients, remember that 401GO offers the fastest, easiest path to getting a 401(k) up and running, without any of the usual hassles or constraints. Contact us today for more information.

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Here at 401GO, we provide a valuable service to small business owners by providing them with an easy, affordable way to offer their employees a 401(k) plan. Many of these small businesses rely on the services of a financial advisor to help them navigate the seemingly convoluted path of investing. With 401GO, financial advisors can choose between built-in or outside 3(38) fiduciary services.

Built-in 3(38): How Does It Work?

As with any career, being a financial advisor comes with pros and cons. Finance is an exciting field, but that excitement comes with a price: risk. Depending on a number of factors, including the types and numbers of clients you have, your expertise and experience in various areas of finance, your comfort level taking on certain challenges and assuming risk, and your ability to weather the storms that are part of the finance and business landscape, you may prefer to delegate the task of assuming some of that risk to our 401GO advisor.

We operate a robo-advisor that financial advisors can count on to select and execute investments on their behalf. Our advisor fulfills all the requirements necessary to act as your client’s 3(38). Our 3(38) creates a robust and affordable fund lineup, saving them (and you) money, time and risk.

Selecting funds and managing investments isn’t easy — if it was, anyone could do it. But just anyone can’t do it — in fact, they’re not even allowed to, since ERISA was written to protect companies and individuals from devastating losses incurred through mismanagement due to inexperience, ignorance, genuine errors and, as much as possible, intentional fraud.

In selecting investment lineups for your clients, our financial advisor ensures they are:

• Astutely chosen — Financial advisors can count on the experience and professionalism of our 3(38) services. We’re here to assume the risk and take some of the work off your plate.
• Economical — The services you perform for your clients saves them money, and the services you receive from the GO Invest advisor saves you money. The more you save, the more competitive your rates can be, and the more your bottom line can grow.
• Diversified — Diversification in a retirement portfolio or under ERISA 3(38) fiduciary rules involves spreading investments across different asset classes, industry sectors and geographic regions, to reduce risk. This strategy aims to protect against market volatility and large losses. Fiduciaries must ensure that plan investments are diversified to fulfill their obligations and provide participants with a range of investment options.

Additionally, GO Invest reviews all investment options quarterly and adjusts them as needed to maintain a healthy lineup.

Acting as a 3(38) Fiduciary

As much as financial advisors love the built-in advisor option for its flexibility, efficiency and reliability, there are times when you may want to assume the 3(38) role yourself and create custom fund lineups using our proprietary fund builder. This allows you to play more of an active role, keep more control and take the reins of your clients’ investments, managing their assets on their behalf.

While some financial advisors are content in a 3(21) role in which they are limited to offering advice and making suggestions to the plan sponsor, taking on a 3(38) role gives you the added responsibility of selecting the investments. For some financial advisors, taking on this role gives them valuable experience and helps build skills that they can parlay into growing their business. Others who go this route have worked as financial advisors for many years and are comfortable in the role of a 3(38), thus, they do not have the worry of finding enough time and resources to fulfill their clients’ needs, because they already are well-versed in this area.

A Third Option: 3(38) Partnerships

Yet another valuable option 401GO provides its clients is the opportunity to partner with a third party who can act as a 3(38). With this option, you can provide your clients 3(38) service without having to furnish that service yourself. This is a perfect hybrid option for financial advisors who want to keep as much control as possible without having to devote the necessary time and effort to deliver the complete services your clients need.

Our 3(38) partners specialize in creating investment lineups and keeping them updated and tidy.

You can suggest and select investments for your clients, but instead of implementing the investments yourself, you may choose to partner with one of our third parties. As much as so many of us have come to love the automated services that make our daily lives so much easier — like the 3(38) services provided by GO Invest — we know that some people still like dealing with individuals, and for them, we offer our third-party service for a small additional fee.

401GO: More Choices for 3(38) Services

At 401GO, we offer our clients so many choices because we want them to have the flexibility to manage their clients’ investments in the manner that suits them best. Whether you prefer to act as your clients’ 3(38) or to outsource this service, we want you to know that when you work with 401GO, you have that choice. 401GO saves you — and your clients — time and money.

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What Is 401(k) Payroll Integration?

Payroll integration is a method of connecting a 401(k) provider to a payroll provider so that contributions can be calculated and deposited seamlessly.  Not all platforms offer payroll integration, and of those that do, some may offer 180 integration while others offer 360 integration. 

But what is 180 and 360 integration and what does it mean to you as a business owner?

When we talk about 180 integration, we are referring to a plan administrator’s ability to directly collect important information from the payroll provider such as how much each employee contributed during a particular pay period.

It’s critically important to use accurate data, as any mistakes can have a profound impact on the funding of employees’ 401(k) plans — especially if they are not caught quickly.

With 360 integration, the data not only moves from payroll to retirement, but also the other direction, from retirement to payroll. This is enormously helpful in making sure updates made to employees’ accounts are reflected in their payroll deductions automatically and immediately.

If your small business uses a smaller or less popular payroll provider, 401GO can still deliver payroll integration services via True360. With this service, our partners grant us access to their payroll system so that we can extract the data we need. Although the True360 process is completed differently, the end result to business owners is the same — automatic deductions, deposits and updates with no work.

Why Payroll Integration Matters

Payroll integration is a huge benefit for many reasons, one of the main ones being the level of accuracy it provides. The more steps there are in any process, the greater the chances for error. When your employee payroll data is sent directly from your payroll provider to your plan administrator — without going through additional manual steps at your company or elsewhere — it reduces the margin of error. No one will mistype a contribution number, transcribe it incorrectly or forget to send it, because these steps have been eliminated.

This kind of precision is not only valuable to your employees, but it also helps keep your company in compliance with laws related to the collection, management and disbursement of 401(k) funds. Violating these laws — even accidentally — can mean steep fines and penalties levied by the IRS or another governing body. It can be devastating to watch your hard-earned profits vanish that way when your intention was only to benevolently provide your employees with a valuable benefit.

As an employer — or a financial advisor — if you are concerned with security in the transfer of your data, know that when you work with 401GO, you can rest assured your data is safe. We employ bank-level security with all our data transfers and storage, so our customers can have the peace of mind they deserve without having to worry about a data breach or nefarious activity.

Top-quality payroll integration services not only safeguard your data and work to improve accuracy and compliance, but they also save countless hours of time — time your employees would otherwise have to spend manually entering data.

360 Integration for Small Businesses

Payroll providers are a valuable and convenient resource, but they don’t make sense for all businesses — especially small businesses. If your business manages payroll manually, our team will offer a tutorial on how to include 401(k) contributions in your system, a process that only adds a few minutes of work for you each pay period.

True360 is especially valuable if your business doesn’t utilize one of the “big boys” in the payroll industry, like ADP or Paychex. These large providers are integrated with many 401(k) companies, but smaller providers are often overlooked. Our payroll integration service allows you to get all the benefits without the hassle or expense of switching to a larger payroll service.

With our True360 integration, we do all the work and your company gains all the benefits. When you work with 401GO, you never have to worry about how payroll integration happens and whether it’s safe — enrolling and managing the plan is a one and done.

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One of 401GO’s primary goals is making investing easier — for companies and their employees. Our automated guided portfolio builder can quickly assist users in making the types of selections they may not be comfortable making on their own.

Choice Overload

Choice overload is real, and although it has become more prevalent since the dawn of the internet, having too many choices has been an American problem for a long time. While some consumers have more trouble making decisions than others, the fact is that the more choices you have, the more difficult it can be to decide. No matter what you’re buying, you want to make the best choice for you. At 401GO, we offer many more choices than other plan administrators — well over 100.

While investing in any of the options we provide is infinitely better than putting your money in a bank account, under your mattress or into your brother-in-law’s latest startup, it’s clear that some options are better for some investors than others. How do you know which are best for you?

Ask the Portfolio Builder

When you use the 401GO portfolio builder, it automatically takes into account such factors as your age and the age at which you expect to retire. It’s critical to consider how long it will be before you will need your retirement funds — the closer you are to retirement, the less risk you want to take on.

For many workers, a 401(k) is their first foray into investing, and at 401GO, we want that to be a good experience — free of angst and regret. To accomplish this, our automated portfolio builder holds your hand through the process, asking you important questions that help us determine your capacity for risk. Next, our algorithms build a customized portfolio, based on all the relevant criteria. All you have to do is watch your money grow!

Getting Comfortable with Investing

Whether your 401GO portfolio is your first time investing or you have been investing for years, know that our guided portfolio builder is an option you have — not a requirement. You can devote as much or as little time and energy to the process as you want. For instance, you can use our guided portfolio builder and then opt not to invest in the funds it recommends. Or you can accept some, but not all, of the recommendations. Or you can build your entire portfolio on your own.

What makes the 401GO system so advantageous is that you can make changes to your portfolio whenever you wish. You are not tied to any single fund for any period of time. Thus, you may want to start investing with the guided portfolio builder, then over time, as you learn more about investing through your own research, you may opt to make changes.

The Rewards of Investing

Time was, an employee’s retirement was funded by their company’s pension plan (if their company had one) instead of a 401(k). In the best-case scenario, employees enjoyed a comfortable retirement, funded by their employer. In the worst-case scenario, the employer went bankrupt before or during the employee’s retirement, leaving them in the lurch. With the passage of the law now known as ERISA in 1974, pensions had to be insured, guaranteeing employees’ benefits. Shortly thereafter came the birth of the 401(k) plan, an alternative that was easier and cheaper for companies to manage than pensions.

While some may lament the demise of pensions which lay all risk at the feet of the employer, one big advantage of a 401(k) plan is the control it hands over to employees. Although employees take on more risk, they may see much larger returns on their investments as well. 

Regardless of whether the investments pay moderately or handsomely in retirement, the choice lies wholly with the employee, which is how many investors prefer it.

The Role of Financial Advisors

As much as we like to extol the virtues of choice when it comes to your investments, we want you to know that you are always free to use your company’s financial advisor to help you make important decisions with respect to your 401(k). We can grant access to your account to your employer’s financial advisor so they can see what your investments are and how they are doing. Your advisor may recommend you stay the course or make changes to better meet your financial goals.

Start Early for Best Results

Your employer has chosen to work with 401GO to provide you with an important benefit — the opportunity to invest in your future. A secure retirement greatly improves quality of life. We have provided our guided portfolio builder and we offer affordable investments as a way to encourage plan participation. With a greater pool of participants, more favorable outcomes are possible.

Get your recommendations from our guided portfolio builder today, and enjoy the benefits of a customized retirement plan for life.

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A fiduciary is anyone who exercises authority or control over the management of a retirement plan or its assets.

Employers must take on several fiduciary responsibilities. But fortunately, they can outsource many of their fiduciary duties, allowing them to utilize a 401(k) provider like 401GO to cover many of the reporting, plan design, and investment selection aspects of their 401(k). Here are six needs business owners must ensure are met.

#1: Fees

Employers must take steps to protect plan assets from facing exorbitant fees, as these can significantly impact how much an employee may have to retire. Though it isn’t always clear what constitutes a reasonable fee and what is too high, many employers benchmark their 401(k) plan fees against those of competitors in the same industry. This includes comparing expense ratios for investments and the overall plan fees. By comparing your plans’ fees to three or more competitors, you will ensure that any expenses taken out of plan assets are reasonable and fulfill your fiduciary duty.

#2: Investments

Fulfilling investment-related fiduciary responsibilities can feel overwhelming for small business owners who may not have investment experience. However, the core of this obligation is straightforward; employers must offer a prudent selection of funds, so employees have access to various financial markets at an appropriate cost. Many employers find that using index funds is an easy solution that simplifies the process while providing low expense ratios for their staff. This arrangement works out well for both parties, making it a win-win.

But fortunately for those that aren’t confident selecting an investment line-up, they can outsource this task.

As the 3(38) fiduciary, we take on the responsibility and liability of selecting appropriate retirement funds and then make personalized recommendations to participants on allocating their investments.

At 401GO, we offer guided portfolio design as a feature of every 401(k) plan. That means we’ll design and suggest a customized portfolio based on each participant’s needs and investing goals. We use several factors such as the time until retirement and risk tolerance to suggest a customized portfolio.

#3: Deposits

Next, employers must deposit employee contributions in a timely manner.

Here are the rules, according to the IRS and Department of Labor:

“Department of Labor rules require that the employer deposit deferrals to the trust as soon as the employer can; however, in no event can the deposit be later than the 15th business day of the following month. Remember that the rules about the 15th business day isn’t a safe harbor for depositing deferrals; rather, that these rules set the maximum deadline. DOL provides a 7-business-day safe harbor rule for employee contributions to plans with fewer than 100 participants.”

Failure to timely deposit employee contributions can result in plan disqualification in certain instances.

#4: ERISA Fidelity Bond

An ERISA fidelity bond is “a type of insurance that protects the plan against losses caused by acts of fraud or dishonesty.”

Employers must maintain adequate ERISA fidelity bond coverage that equals the lesser of 10% of plan funds or $500,000. Ultimately, this coverage protects the plan participants against losses resulting from larceny, embezzlement, misappropriation, and more. Most companies have liability coverage that will insure smaller plans, but once assets reach $100,000, it’s imperative that a bond is purchased.

It’s important to note that ERISA bond coverage must be purchased through an approved provider from The Department of Treasury’s list of Approved Sureties.

#5: Administration

Employers must also meet administration-related responsibilities such as ensuring the governing document is compliant with current law, following the plan document’s operational procedures, enrolling qualifying employees based on service and age requirements, allocating contributions to employee accounts according to the plan document, facilitating distributions per the plan and vesting schedule, and handling applicable plan loans. Government reporting requirements must be met for ERISA compliance, and records must be stored in line with ERISA document retention rules. Additionally, employers should stay up-to-date with plan testing, and any testing failures should be corrected promptly.

Again, employers can outsource these tasks. 401GO will handle all of these administrative duties and more as part of our automated 401(k) solution for small business owners. As the 3(16) plan administrator, we ensure plans comply with ERISA standards and handle all reporting and notifications to plan participants and the IRS.

So, while the administration-related responsibilities can be daunting, you don’t have to handle them alone.

#6: Choosing a 401(k) Provider

Lastly, employers have a fiduciary responsibility to select competent service providers with reasonable fee structures. However, this can be challenging to navigate as the services, and associated costs can differ greatly between providers. 

Making sure you’ve done your due diligence when selecting a service provider can be critical. Researching past performance and customer reviews is one way to ensure you make a well-informed, prudent decision. Additionally, comparing all costs associated with a particular service provider, such as set-up fees, ongoing support fees, and investment-related expenses, can help employers find the best choice for their plan assets while staying within reasonable fee structures and fulfilling their fiduciary duty.

For this reason, we recommend never using a provider whose fees and services you don’t fully understand. 
At 401GO, we make this simple by offering a one-stop shop for your 401(k) with no hidden fees. That’s no startup fees, no base fee, no filing fee, no compliance fee—no hidden fees in your 401(k) plan, period. This allows employers to feel confident in us as a 401(k) service provider, knowing that the fees are reasonable and the services are comprehensive.

Fintech Solutions Simplify Responsibilities for Business Owners

In the end, while the fiduciary responsibilities of a 401(k) plan can seem heavy, you never have to go it alone.

At 401GO, we provide small business 401(k) plans powered by an easy-to-use, automated platform. Our streamlined approach allows you to get up and running in just minutes with simple and affordable pricing to fit your unique business.

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