Skloff Financial Group Services

Top 5 Reasons Skloff Financial Group

Should Manage Your

401(k), 403(b), 457 or Retirement Account

Who's managing your retirement plan at work?

Who's making changes in your investment choices for your account?

Who's reviewing new investment options in your retirement plan?

Who's making sure you will meet your retirement goals?

If your retirement plan is like most...it's you.

In a recent study based on nearly one million participant 401(k) portfolios, 69% of participants had inefficient portfolios and/or inappropriate risk levels. Retirement plan assets generally represent your largest investment asset. With Skloff Financial Group, your assets will be given the attention they require.

1 You are busy focused on your family and job.

2 You want comfort that your retirement goals will be met.

3 You want customized portfolio management.

4 You want a dedicated financial advisor you can speak with.

5 You want your assets managed by experts.

Question of the Month:Can I Boost My 401(k)?

The Independent Press - 06/02/10
Money Matters
By Aaron Skloff

Q: Can gaining help with my 401(k) really improve my performance and optimize my risk?

A: Yes. In a recent study based on nearly 400,000 401(k) participants, the average participant who did not seek help fared poorly in comparison to those who did seek help. On average, the median annual return for participants who did not seek help was almost 2% worse (net of fees) than participants who did seek help. Note: The study included one bull market year (2006), one mixed market year (2007) and one bear market year (2008).

The primary reasons for the poorer performance among participants not seeking help are:

— Inappropriate Risk Levels. In many cases, participants far from retirement were invested too conservatively while those close to retirement were invested too aggressively.

— Inefficient Portfolios. In many cases, participants not seeking help are not being compensated for the risk they take.

To quantify the impact, let’s look at an example after 40 years, where each makes a lump sum contribution of $10,000 at age 25. Based on median returns of approximately 6%, a participant seeking help could have 103% more money ($105,800) than a participant not seeking help. Participants seeking help outperform participants not seeking help 88% of the time.

When seeking help, verify the information is coming from a reputable and unbiased source. Many ‘Financial Advisors’ responsible for providing help on your 401(k) plan are not qualified. Few have a graduate degree in finance and/or a certification in portfolio management, such as the Chartered Financial Analyst (CFA). Few have formal training and experience in portfolio construction and risk control.

To make matters worse, even fewer will accept true fiduciary duty. True fiduciary duty legally obligates the provider of help to place the participant’s interests before any other party: the provider of help, the provider’s employer or the shareholders of the employer.

Unfortunately, many of the largest wealth and investment management companies are publicly traded companies owned by shareholders. And, like all publicly traded companies, they must act in the best interest of their shareholders — not their clients. A privately owned Registered Investment Advisor (RIA) is legally obligated to accept true fiduciary duty, without conflicts.

Remember, this is your life savings not an experiment for the inexperienced. Work closely with a credentialed, experienced Financial Advisor affiliated with a privately owned RIA, legally obligated to accept true fiduciary duty, without conflicts.

Note. Aaron Skloff, Accredited Investment Fiduciary (AIF), Chartered Financial Analyst (CFA), Master of Business Administration (MBA) is CEO of Skloff Financial Group, a Registered Investment Advisory firm based in Berkeley Heights. He can be contacted at www.skloff.com or 908-464-3060.

Who’s in Charge of My 401(k)?

The Independent Press - 12/03/08
Money Matters
By Aaron Skloff

Q: Who manages my 401(k) and my wife’s 403(b) and 457(b) accounts?

In a recent study based on nearly one million participant 401(k) portfolios, 69% had inefficient portfolios and/or inappropriate risk levels. Almost 50% held high concentrations of company stock and 33% were not contributing enough to their 401(k)s to receive the full employer match. If your retirement plan is like most, the only person responsible for managing your account is you.

The Solution
Either take an active role in researching and managing your account or hire a professional for the job. Listed below are the top five retirement plan management mistakes investors make and how to avoid them.

1. Inappropriate Risk Level.
As time marches on, your investments should change with your long term risk tolerance. Adjust your portfolio to reflect your risk tolerance.

2. Concentration in Company Stock.
Owning too much of its stock could leave your retirement nest egg in shambles. Do not allocate more than 10% of you assets to any one stock.

3. Not Researching Investment Options.
Most investors lack the time and skills to properly research each investment option.

4. Not Managing the Account.
An unmanaged account can turn a once low-risk investment into a high-risk investment. Manage your account to reflect investment option changes and shifts in asset classes.

5. Hiring the Wrong Manager.
Unsure if the person is acting in your best interest? Have the person accept fiduciary duty in writing on company letterhead. In doing so, that person is obligated by law to place your interests above and beyond their interests or their company’s interests.

Avoid 401(k) Mistakes and You're Sitting Pretty

Princeton Business Journal - 01/09/07
It's Your Business
Aaron Skloff

Q: My wife's 401(k) was devastated when the New Jersey technology company she worked for hit hard times.
Now, I am worried about the 401(k) offered by the New Jersey pharmaceutical company I work for. What are the
common mistakes people make in their 401(k)'s and how can we avoid them?

The problem: mistakes made in 401(k) plans. Many companies are eliminating or are simply not offering traditional pension plans. Instead, they are shifting the responsibility of a retirement nest egg to the employees. Most employees are not skilled in managing one of their largest assets, their 401(k) account, and make costly mistakes.

Just a quick background on the 401(k) and how it works. Employers offer their employees 401(k) retirement plans so their employees can contribute a portion of their own compensation toward their own retirement. As an incentive, some employers provide free matching of employee contributions. Other employers match and make outright contributions through profit sharing programs. Unlike traditional pension plans, where employers are required to contribute to the employees' retirement accounts, many 401(k) plans require no contribution by the employer.

A traditional 401(k) allows employees to make pre-tax contributions through salary deferral. Contributions, interest, gains, dividends and the like are all sheltered from taxation until the assets are withdrawn. Employee contributions directly reduce federal income taxes. For example, an employee who earns $100,000 and contributes $20,500 to his or her 401(k) only pays federal income taxes on $79,500 of income that year.

Withdrawals are taxed as income in the year they are taken at that year's tax rate. Imagine a 20-year-old employee not paying taxes on contributions and gains for 50 years; then being taxed only on the amount withdrawn. How often do you have the opportunity to legally avoid paying income taxes, penalty and interest free, for 50 years? The employee contribution limit per year is $15,500 for those under the age of 50 and $20,500 for those 50 years of age or over.

Common mistakes New Jersey employees make:
• Forgoing a company match.
If your employer matches your contributions 25 cents on the dollar up to 6 percent, contribute at least 6 percent and earn a guaranteed 25 percent return. Better yet, defer a larger percentage and earn additional tax benefits throughout your career and thereafter.

• Withdrawing from your 401(k) before retirement.
Money taken out before the age of 59½ is assessed a 10-percent tax penalty and is taxed at the current tax rate (which is often higher than in retirement). Some 401(k) plans allow employees to borrow against their own balance, paying themselves back plus interest. Think of your 401(k) assets as your absolute last resort when you hit a financial jam.

• Investing too conservatively.
Just because this is retirement money does not mean the portfolio should be invested too conservatively. To the contrary, the longer your time horizon the more risk you should tolerate.

• Over-investing in company stock.
New Jersey is home to some of the largest pharmaceutical companies in the world, which employ tens of thousands of New Jersey residents. Many employees want to show their pride by allocating 25 percent, sometimes up to 75 percent of their 401(k) to their company stock. Think twice before making this mistake. If the company hits difficult times the stock and your 401(k) can plummet, even if the overall financial markets soar. Simultaneously, if the company is having difficulties your job could be at risk. A good rule of thumb is to limit company stock to 10 percent of your portfolio.

• Over-investing in one industry.
It was only five years ago that you heard family, friends and colleagues saying, "You can't lose money investing in technology stocks." We all know how that story ended — badly. Not only were there massive layoffs throughout New Jersey, but many companies ended up shutting their doors. Many employees already had technology exposure in their 401(k), yet increased the exposure even further by allocating money toward technology stocks and/or funds. The end result was doubling or even tripling their losses. Avoid over-exposure in any one industry — particularly the one your job depends upon.

Action Step — bearing in mind the above advice, contribute to your 401(k). Contributing to a 401(k) immediately defers the taxation of any contributions and gains, provides a disciplined way to save for retirement and could provide a guaranteed return if your employer matches your contributions. If your employer does not offer a
401(k), ask to have one implemented. Like most investments, the earlier you begin contributing the more wealth you can create in the end.

Aaron Skloff is an accredited investment fiduciary, chartered financial analyst, and holds a master's of business
administration degree. He is the chief executive officer of Skloff Financial Group, a Berkeley Heights-based registered investment advisory firm. The firm specializes in financial planning and investment management services for high net worth individuals and benefits for small to middle sized companies. He can be contacted at (908) 464-3060.