Avoiding the Haymaker
The most feared boxer of my generation, ‘Iron’ Mike Tyson, was asked about his opponent’s approach to fighting him, (he moves laterally, he is a natural boxer and won’t get into a slug-fest, etc.) to which ‘Iron’ Mike replied, “everyone has a plan until they get punched in the mouth.”
The last 45 days feels like we’ve been punched in the mouth. We all had plans, we all had strategies to grow our practice, grow our clients, grow our savings and SMACK, a right hook to the jaw that changes everything.
What do we do now? There are so many unanswered questions.
Is there a better way to guard our 401(k) investors from times like these? Cash accounts are good for times like this but it will hurt you in the long term. Stocks and bonds can be beneficial but extremely volatile day-to-day. Mutual funds are great long term but can be extremely painful during market downturns. Target date funds help manage cash, bonds and stocks and create a glidepath that manages the risk; however, will a 2025 glidepath fit everyone looking to retire in four years? Does a semi-static approach work?
What works is a managed account. A true managed account as your plan’s QDIA, managed by a discretionary trustee, can provide significant benefits for your clients. A managed account with close to 100 customized glidepaths based up on age, gender, compensation, social security benefits, risk tolerance provides the personalization necessary to weather the storm.
To learn more about the benefits of a discretionary trustee and how that role differs from that of a directed trustee, please see this recent article I authored for BenefitsPro: Why 401(k) Plan Sponsors Should Consider a Discretionary Trustee
We will win this fight but another market haymaker will come and will leave many staggered. Will you and your 401(k) clients be prepared?
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