Destiny

Watch your thoughts; they become words.

Watch your words; they become actions.

Watch your actions; they become habits.

Watch your habits; they become character.

Watch your character; it becomes your destiny.

                                                 – Frank Outlaw

Workplace retirement plans like 401(k) s and 403(b)s allow investors to save with higher annual contribution limits of $22,500 versus $6,500 on their own in an IRA.  They also can offer employees matching contributions that can range between 50% to 100% of the employee's contribution.  But how do they compare to the Fidelity L.O.R.D.S. Strategy?

With these incentives, most people don't really think about it any further.  But it's not a simple decision.  Employers will cap their contributions to you, from 3% to 6% of your annual salary.  Also, if you don't stay at the job long enough, you may not be able to take all of those employer contributions with you.  As for the higher contribution amount that 401(k)s offer, the average person still only contributes $6,000 per year.  So, with these incentives, it is essential to analyze your very limited 401(k) investment options, where the average plan returns only 7%.

Let's consider for our example below, you stay at a job longer-term and, if you move on, will either roll your money over into a new 401(k) or leave it sitting in the old one.  The average person makes $82,000 per year and contributes $6,000 per year at a 7% return in their 401(k) versus the Fidelity L.O.R.D.S. Strategy's historical returns of over 14%.  As you can see in the table below, the L.O.R.D.S. Strategy surpasses the 401(k) in 9 to 14 years, even with employer contributions, and the difference in Fidelity's growth is exponential from there.

If you would like some help understanding your 401(k), 403(b) or other investment accounts, please give us a call.

Sincerely,

Samuel Schaeffer