Investor’s Retirement Fund Barely Grows After 401(k) Move

In 2021, a 34-year-old investor decided to take conventional advice to heart. With guidance from a financial advisor, he transferred about $50,000 from his 401(k) into a Traditional IRA. Following that, he essentially did what most people are typically recommended to do with their retirement savings.

“That’s the advice I’ve always received,” he mentioned, noting that he hadn’t really given it much thought. He shared his experience recently on Reddit, in a personal finance community.

Fast forward five years, and the account balance stood at just over $52,000. Despite witnessing one of the most significant multi-year surges in U.S. stock prices, his retirement fund barely budged.

“Wow, you really missed the best four years ever,” commented one user. Another pointed out that an index stock fund in that time frame would have roughly doubled. Yet another suggested that a high-yield savings account would have yielded better returns.

Commenters shared calculations, highlighting that if the investor had opted for low-cost S&P 500 index funds starting in early 2021, that initial $50,000 might now be worth between $85,000 and $95,000, depending on dividends and market timing. Even conservative options like Treasury bills or money market funds would have outperformed his current account.

One particularly liked comment noted, “Considering inflation during this period, you’ve actually lost money.”

As the discussion unfolded, several theories emerged. One highlighted the issue of fees; many commenters speculated the advisor might have been charging a fee, around 1% yearly. For smaller amounts, that could quietly chip away at profits. “A 2% fee over 40 years can eat up half of your returns,” warned one user.

Another theory revolved around overly cautious investments. Some suggested that the advisor may have allocated funds toward more conservative bond-focused or income-focused investments, which have taken a hit due to rising interest rates over the years.

One individual emphasized that a 20/80 stock-to-bond portfolio could have generated better returns, pointing out the situation seems impractical for someone in their early thirties.

Later, the investor clarified that his IRA was diversified across multiple funds, including one named Bluerock. Some users noted that this particular fund had underperformed compared to basic cash-alternative funds during the same period.

“This is gross negligence,” remarked one commenter after evaluating long-term performance.

Many commenters reassured him that transferring an IRA is relatively straightforward. “I called Vanguard, and they were very helpful,” one user recounted. “They guided me through everything.”

Several resources exist to help individuals evaluate advisors before committing, with services like WiserAdvisor offering pre-vetted financial advisors based on personal goals and risk tolerance.

Looking on the bright side, many said it was good that the investor recognized this issue now, rather than years down the line.

“No one said to ignore your money,” one user noted. “They advise against panicking, don’t sell hastily, and avoid trying to time the market.”