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401K Management: What To Know About Passive And Active Management

Saving for retirement is a major goal for everyone. Experienced 401K providers understand that the choices we make today with our investments can have a significant impact on our tomorrow, especially since the retirement age continues to increase. While some firms opt for keeping their strategies “status quo,” leading 401K providers are constantly trying to innovate their service capabilities to achieve the best results possible for their clients, while maintaining, or even reducing, costs. As a result, passive and active management strategies have surfaced as a reliable plan option for investors in a wide range of industries.

What Are Passive And Active Management Strategies?

Traditionally, 401K plans often focus almost entirely on active investment methods. Active management means that your designated portfolio manager coordinates all of the buying and selling decisions in your plan. In this type of strategy, investors rely on their managers to navigate through market highs and lows, and hopefully beat the overall market average. This tactic often includes continuous transactions as the portfolio manager attempts to outperform current market temperature. While carefully monitoring and modifying a portfolio brings with it many benefits, many participants worry about excessive transaction fees cutting into their savings. 401K providers managing these plans are constantly considering new ways to cut costs while optimizing ROI.

Passive investments strategies offer a broader, big-picture, long-term overall approach to retirement savings. Also known as indexing, passive tactics are based on investing in more of a package program than aggressively monitoring individual stocks. This type of savings plan allows users the opportunity to invest in the same proportions and securities in an index like the S&P 500 or Dow Jones Industrial Average. The main strategy to this type of savings is to duplicate a well-performing index, play the law of averages, and rely on the knowledge that over the course of the investment duration, participants should see significant final results.

Combining Passive And Active Saving Strategies

Recent trends have shown that combining passive and active management savings can reap some impressive benefits. These hybrid plans grants the affordability of passive portfolios as well as the versatility and hands-on approach active management delivers.  Utilizing a suite of options allows for customization of each plan; users can meet their savings comfort levels as well as simultaneously manage overall costs.

If you’re still not sure how you should invest for retirement, seek advice from a professional. The best way to designate an ideal portfolio is to work with qualified 401K providers. A reputable firm will have the experience and insight needed to partner with you, address your specific investment needs, and develop a final plan that grants you peace of mind as well as delivers desired results.

Contact The Payroll Company Today For More Information

If you have questions about your current retirement savings portfolio, The Payroll Company can help. Our team of veteran 401K providers partner with you to understand your unique savings needs and objectives to ensure you meet your goals. Contact us today to hear more!