The 401(k) began as a company profit-sharing plan. Companies had been funding
pensions for years, but as their annual profits and stock prices experienced volatility,
they looked for ways to share that burden with employees. Through profit sharing,
workers made money when the company did and made less during down years. This
allowed employees to defer salary contributions into a retirement account before
deducting taxes and established rules to ensure the plan was available to all
employees, not just executives.
Once the 401(k) was established, it could be used to invest in more than just company
stock. It was a way to put investment control into workers’ hands without limiting their
retirement income prospects based on their company’s performance.
The shift to personal savings and investment management hasn’t always led to high
levels of reliable income as pensions typically did. After all, your average worker doesn’t
have in-depth investment knowledge or the time to follow the markets closely. And,
unless they were willing to pay an advisor for advice, they wouldn’t get much help in this
area.
This is one reason to work with a financial advisor who is willing to help you manage
your entire financial picture. You should consider all of your investments when
establishing an asset allocation to help you meet your financial goals. We’re happy to
evaluate your portfolio, including your 401(k) investment options.
