The Federal Government has made it a public policy to make 401ks one of the most secure investment vehicles to hold retirement assets.
What is the key feature that makes 401ks so secure?
All retirement plans are governed by federal laws which require that retirement assets be held in a “trust”, which must be separated from the plan sponsor’s or 401k recordkeeper’s assets. Therefore, if either entity were to face financial difficulties, your account is protected. In fact, even if you face tough personal financial challenges, your creditors cannot touch your retirement assets. 401k trusts are creditor-proof.
The government structured it this way because Uncle Sam wants you to be able to count on this money being there for you when it is time to retire – regardless of the circumstances.
But please remember, do not confuse security with investment performance. Even though your financial assets are held in a secure account, they still can go up and down depending on how they are invested. Therefore, if you want to manage the volatility of your investment portfolio, you can do that with specific investment security selection.
For participants in 401k plans where I am an adviser, and for business owners looking into 401ks for Seattle small businesses, please let me know if you are confused about which investments would be well matched for your investment risk profile. Reach out today at no cost to you, and we can initiate a process to help you analyze your personal situation.