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I have a 401k with my employer that offers a pretty good contribution matching benefit. I am young and I've had the plan for about 5 years and my money is starting to grow into a pool that is big enough not to ignore.

With that said, I want to be sure that I am investing in the right investment options that are available to me within my 401k. The plan offers about 20 mutual funds that are each specific and unique to a certain type of investment (large caps, small caps, international funds, etc.) I can allocate as much or as little to each fund and I would imagine that this type of setup is pretty standard across 401k plans.

I would like to invest in the right options in my 401k for my specific retirement goals. I can do the research on my own, but I am an average joe and I'd like to enlist the help of a third-party service that could help direct me. The company that holds the 401k is a well-known company and does a good job at providing information regarding the available assets, however, I would like to look for the opinion of a 3rd-party that can help direct me in how to invest in my 401k.

I've heard of Smart401k.com but I was wondering if there are any other alternative services that provide the same kind of advice? Furthermore, is there a good, non-biased site that reviews such services?

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    Given the recent 401(k) activity here, I'm compelled to ask - have you looked at the fees charged in the choices available to you? Care to share? – JoeTaxpayer♦ Feb 2 '12 at 0:25
  • @JT-- No, that information hasn't be provided to me just yet. However, I can say that I work for a sizable company (employees about 5000 people in the US.) Furthermore, we have an exceptional matching plan and a very dedicated HR team that each year tries to re-evaluate and update our benefits in the best interest of us employees. I'd imagine our fees are reasonable. – RLH Feb 3 '12 at 17:25
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    I'd suggest that until you know for sure, you only deposit up to the match. The "not knowing" is a huge red flag to me. – JoeTaxpayer♦ Feb 3 '12 at 19:06
  • Joe, that is exactly what I'm doing now. I changed my allocations about a year ago. – RLH Feb 3 '12 at 19:09
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Any fee based financial adviser should be able to help you. I don't think you need to worry about finding a 401K specific adviser. I'm not even sure that's a thing.

A good place to start is the National Association of Personal Financial Advisors.

The reason I specifically mentioned a fee based adviser is that the free ones are working on sales commissions, which may influence them to give advice that is in their own best interest more than yours.

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    Yes go for a fee based adviser, because you will not be cashing out of the 401K and going with funds the advisers sells. You want them to tell you what types of funds (large caps, bonds, international...) and the percentages based on age, other needs, and risks. – mhoran_psprep Feb 1 '12 at 16:32
  • Fee-based is definitely the way to go. Also, Even if a 401k adviser was a thing you wouldn't want one as your 401k should generally be considered as part of your full financial situation. – rhaskett Sep 29 '16 at 15:28
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Another option to a human advisor is FutureAdvisor, a web service that (if it supports your 401k plan) gives personalized algorithmic advice on what you should hold in your 401(k) and other retirement accounts.

If it doesn't support your 401(k) plan just yet you can sign up to be emailed when your plan is added.

[Disclosure: I work here, but I believe in the product and it's designed to solve this exact problem so I'm mentioning it here]

Note from JoeTaxpayer - bolu's disclosure is much appreciated. The fee is $39/yr, with a free trial. Consider that a commissions based advisor won't even take on a $10K level account, and at $100K, you'd be hard pressed to gain by more than his 1% fee. So while I've not dug deeper into this site, a rules-based methodology is likely to be worth the cost if over time it gains you even a fraction of a percent compared to what you'd have done blindly.

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The vanilla advice is investing your age in bonds and the rest in stocks (index funds, of course). So if you're 25, have 75% in stock index fund and 25% in bond index. Of course, your 401k is tax sheltered, so you want keep bonds there, assuming you have taxable investments.

When comparing specific funds, you need to pay attention to expense ratios. For example, Vanguard's SP 500 index has an expense ratio of .17%. Many mutual funds charge around 1.5%. That means every year, 1.5% of the fund total goes to the fund manager(s). And that is regardless of up or down market.

Since you're young, I would start studying up on personal finance as much as possible. Everyone has their favorite books and websites. For sane, no-nonsense investment advise I would start at bogleheads.org.

I also recommend two books -

  • The Coffeehouse Investor - amazon link
  • The Bogleheads' Guide to Investing - amazon link

This is assuming you want to set up a strategy and not fuss with it daily/weekly/monthly. The problem with so many financial strategies is they 1) don't work, i.e. try to time the market or 2) are so overly complex the gains are not worth the effort.

I've gotten a LOT of help at the boglehead forums in terms of asset allocation and investment strategy. Good luck!

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