Don’t Make These 457b Mistakes (Deferred Comp Plan)

“Don’t worry; it will come back at some point.” This advice was given to a new client, who I will refer to as Mrs. Smith, by her former financial professional. 

Delaying Retirement Due To Bad Financial Planning

After a long career, Mrs. Smith was planning on retiring in the upcoming year. Instead of planning a retirement party, she was now contemplating working for another two to three years to make up for losses incurred during the recent market downturn caused by the Covid-19 pandemic.

Aggressive Investing And Retirement

I sat down with Mrs. Smith to review her 457b retirement portfolio and found several areas of concern. First, she was in an aggressively positioned variable annuity, which was primarily composed of equities.

Secondly, the variable annuity had high fees and administrative costs, which further hurt her portfolio in a down market. These fees totaled over three percent (3%) annually and are charged regardless of performance.

High Fees And Administrative Costs

Every Retirement Plan Is Different

After identifying the areas of concern, it was time to create a new plan for Mrs. Smith to get her retirement back on track. Mrs. Smith advised she would be receiving a state pension, and we found that her pension benefit would be equal to sixty-five percent (65%) of her final working year’s salary.

Knowing The Rules Of A 457b Plan

I explained to Mrs. Smith that once she retired, she would no longer be able to contribute to her 457b, which was another reason to focus on principal protection and recovering from her recent losses. I could see the look of stress and frustration on Mrs. Smith’s face as we reviewed her statements and broke down her recent losses and account fees that she had been unknowingly paying for almost twenty-five years.

Lessons Learned From 457b Mistakes

There are several takeaways from the experience I had with Mrs. Smith. It is crucial to continually evaluate the positions held within your portfolio.

Finding A Financial Advisor You Can Trust

A fiduciary is a financial advisor that is legally required to work in your best interest, not theirs. They typically work for a flat fee and give unbiased advice that is genuinely in your best interest.

Swipe up now to read the full post!

Read more

8 Best Suggestions For Managing Your Small Business Finances

Consider This Before Setting Up A Small Business

7 Tips to Help You Find Cheap Prescription Glasses