Has Your 401(k) Made Partner?

When you were an associate, your financial picture probably looked very different than it does today. You may have been paying down student loans, purchasing your first home, and were just getting your 401(k) started. Since becoming partner, things have changed – your tax picture became more complex, so you hired a CPA. Your net worth increased, so you consulted an estate attorney. Finally, your ability to save above and beyond your 401(k) increased, so you hired a financial professional to help you invest. The major financial area that is commonly neglected is the portfolio within a 401(k).

See, what we have found is this; as you advance in your career from a first-year associate to equity partner, your 401(k) investment management has continued to use generic pre-made portfolios, or a mix of the handful of mutual funds offered in the base plan. As your 401(k) has increased in size and as you get closer to retirement, it may be more important than ever to implement a customized portfolio within your 401(k) designed with you and your goals in mind.

So how does one do this? Fortunately, this can be done in your current Schwab 401(k) through what is known as the “Personal Choice Retirement Account (PCRA)”. A PCRA account opens up your ability to invest in a wider variety of financial instruments. Many more mutual funds, ETFs, stocks, bonds, and many alternative investments; taking you from a handful of investment options to hundreds or even thousands. This is helpful if you would like your 401(k) to complement your outside investments, are looking for a specific investment strategy (high growth, high dividend, etc.), or you are just looking for a specific stock or fund. Additionally, you can employ select investment professionals to actively manage your PCRA 401(k) account on your behalf. Of course, each law firm’s rules guiding how you invest in your PCRA are different, but the bottom line is you are not limited to the basic menu of options you have probably been using since you were an associate. *

As a partner, it may be time for you to explore your options as to how you can add the attention, sophistication, and advanced portfolio management to your 401(k) that it deserves. Of course, more investment freedom and flexibility will require more time and expertise and that’s where a CERTIFIED FINANCIAL PLANNER familiar with navigating these options can fit on your team. If you would like to learn more from someone who has experience with Schwab PCRA at law firms, please contact me at justin.caudle@mcadamfa.com or reach out on LinkedIn.