When Good Markets Don’t Equal Good Returns
We recently completed one of the most challenging endurance events in the country—29029—where we hiked the equivalent of Mount Everest’s elevation gain in 36 hours. The experience taught us that choosing your adversity is better than having it chosen for you. However, many of our clients are facing an adversity they didn’t choose: watching the market recover while their 401(k) accounts remain stagnant.
Fidelity manages over 50 million retirement accounts, and they recently reported that the number of 401(k) millionaires decreased in the first quarter of this year. Even though the market has rebounded from that April dip, we’ve seen countless clients walk into our office asking the same question: “Why hasn’t my 401(k) recovered like the market?”
The Target Date Fund Trap
Over the past month, we’ve analyzed statements for five different clients who asked this exact question. All of them had the majority of their dollars invested in target date funds. These funds sound appealing—you simply choose the year you plan to retire, invest your money, and let the fund do the work. A 2025 target date fund manages investments assuming you’ll retire in 2025.
However, the reality is far different from the promise. Target date funds consistently underperform across multiple benchmarks. We recently reviewed a client’s Morningstar report for their target date fund, and the results were telling:
- Morningstar Rating: 1 out of 5 stars
- Fees: High
- Returns: Low
As we told our client, “You don’t want a one-star restaurant on Yelp, and you certainly don’t want a one-star investment fund managing your retirement.” Three strikes, you’re out.
The Professional Management Gap
When clients express frustration about their 401(k) performance, we often respond with a question: “Why would you expect your 401(k) to rebound like the market did?” This might sound harsh, but it addresses a fundamental misunderstanding about how most 401(k) plans operate.
Your 401(k) isn’t professionally managed in the way you might expect. While target date funds have someone making decisions behind the scenes, they’re not customizing strategies based on your specific risk tolerance, market conditions, or retirement timeline. You’re essentially getting a one-size-fits-all approach to something as personal as your retirement.
Additionally, many people change jobs and leave old 401(k) accounts with previous employers. These orphaned accounts often contain investments that were “doing well” when you were actively employed but have since deteriorated. When you roll out of an old 401(k) plan, you typically gain access to significantly more investment options and professional management.
The Moses Steps Approach to Retirement Planning
During our 29029 challenge, one of us found himself struggling on his 13th, 14th, and 15th laps up the mountain. His mindset shifted when he thought about Moses walking up the mountain for the second time at 150 years old. “Let me just take my Moses steps,” he told himself, “and I’ll make it.”
This philosophy applies perfectly to retirement planning. You don’t need to sprint toward retirement or compare your progress to others. The question isn’t whether you’re moving as fast as someone else—it’s whether you’re making consistent progress with a strategy that matches your capabilities and timeline.
We often see clients who are on “lap 12 or 13” of their retirement savings journey. They’re not quite ready to retire, but they’re close enough to start questioning whether they can sustain the effort for another year or two. Just like the 29029 challenge, the key isn’t speed—it’s persistence and having the right strategy for your specific situation.
Best Financial Planner in Woodstock, GA for 2023, 2024, and 2025
We have earned recognition for our commitment to comprehensive retirement planning and client education. Our principals are both fiduciaries and Certified Financial Planners®—the highest designation in the financial advising industry. This certification ensures that we always act in our clients’ best interests, providing objective guidance without conflicts of interest.
We’ve built our practice on the principle that financial planning should be as challenging and rewarding as any endurance event, but with professional guidance every step of the way. Our team brings the same dedication to your retirement planning that we brought to conquering 29029—persistence, preparation, and a commitment to reaching the summit.
Take Action: Analyze Your Current Strategy
If you haven’t reviewed your 401(k) or retirement accounts recently, now is the time. We offer complimentary portfolio analysis that examines your current investments, fees, and performance against appropriate benchmarks. This review process is eye-opening and empowering—it gives you the truth about your current position, even if it’s not what you want to hear.
We’ve never had a client express regret about understanding their investment situation better. Knowledge empowers better decisions, and better decisions lead to better outcomes.
Whether you want to discuss target date fund alternatives, analyze old 401(k) accounts, or simply understand why your returns haven’t matched market performance, we’re here to help. Our no-cost, complimentary 3 Meeting Retirement Planning Process helps you build, protect, and grow income to get you to and through retirement.
Ready to take control of your retirement strategy? Visit www.vincentplanning.com or call us at 770-485-1876. If you’re unsure whether we’re the right fit for your situation, Book a ‘Can We Help’ Call to speak with an advisor about your specific needs.
For personalized financial guidance, reach out to Vincent Financial Group today to schedule a consultation.