It’s more common than you’d think: someone is consistently contributing to their 401(k), doing everything “right,” and yet, their money isn’t working nearly as hard as it should be.
The issue isn’t the contribution. It’s the investment.
When you enroll in a 401(k), your contributions don’t automatically go into a well-constructed portfolio. In many plans, they’re placed into default options: sometimes a target-date fund, sometimes a stable value fund, and occasionally even cash.
Each of these has its place. But none of them are universally “correct.”
Target-date funds, for example, offer simplicity and automatic rebalancing. For many investors, they’re a perfectly reasonable starting point, but that simplicity comes at a cost. Target-date funds can be prohibitively expensive compared to a well-balanced investment portfolio. They can also be overly conservative, particularly for high earners with longer time horizons or more complex financial pictures.
On the other end of the spectrum, we often see accounts sitting in low-yield or stable value options, essentially preserving capital while inflation quietly erodes purchasing power.
The result? You’re saving consistently, but not necessarily growing efficiently.
A simple check can go a long way:
- Do you know what your 401(k) is invested in?
- Does the allocation reflect your time horizon and risk tolerance?
- Are you overly concentrated in one type of fund or too conservative overall?
For many people, the honest answer is: “I’m not sure.”
That’s not a failure. It’s a reflection of how these plans are designed. They’re easy to start, but not always easy to optimize.
This is where coordination matters. Your 401(k) shouldn’t exist in isolation. It should be part of a broader investment strategy that considers your full financial picture: taxes, goals, and long-term flexibility.
If you’ve changed jobs, accumulated multiple accounts, or simply haven’t revisited your allocation in a while, it may be worth taking a closer look.
At Hanover, we help clients bring their 401(k)s into the broader plan, evaluating allocations, identifying inefficiencies, and managing those assets alongside the rest of their portfolio.
Because contributing is step one, but making sure it’s invested properly is what makes it count.