Search

Home Depot FutureBuilder 401(k) Investment Guide


Strengths

  • Match on contributions. Any match provides a fantastic boost to investment returns.

  • Self-Directed Brokerage Option with Schwab. This option allows you to avoid the poor options in the plan and craft your own intentional plan for retirement.

  • Roth option. Especially when beginning to save or if someone in your family expects a pension in retirement the Roth option provides an opportunity to minimize your future tax burden.

Weaknesses

  • Extremely limited opportunities to diversify without using active, gambling managers. Limited diversification and use of high cost, active managers is common of most retirement plans, it is still detracts from attractiveness of using the Home Depot selected options for your retirement savings.

  • Limited asset classes. While the plan sports many US stock funds, there are too few choices in many investment categories necessary for a complete portfolio.

  • Lifecycle funds. The BlackRock LifePath® Index retirement target date options are meant to be a managed portfolio based around an expected retirement date. We strongly discourage their use as the only investment option, and given the alternatives believe they should not be considered.

Strategically, the weighting of the BlackRock underlying fund choices is less than desireable. A more diversified mix across stock asset classes with a tilt toward value stocks may improve results for the long-term investor.

Overall, the funds have little to offer over investing in the lower cost index fund choices available in the plan. We strongly recommend using an advisor to craft a plan to take advantage of the Self-Directed option, especially if your balance is greater than $50,000.

Strategies

While overall the choices in the Home Depot plan are less than desireable, you have a great option to avoid those funds and craft a market-based plan on your own with the Self-Directed Brokerage account. Within that account you can invest in a wide range of investment funds that are allowed within the brokerage window.

Another strategy is to use the core options within the 401(k) and diversify further outside of the plan. By utilizing a companion IRA, Roth IRA, or taxable account, one can take advantage of very low-cost core investment options in the Home Depot 401(k), and supplement with independent savings outside of the plan. This allows you to be sure that even if the brokerage window is taken away in the future that you will be able to diversify.

If you are saving at a rate above the Home Depot match, consider your other options for transferring that additional savings to other tax advantaged accounts outside of the Home Depot plan. Depending on the particulars of your tax and investment situation you may be eligible for and benefit from:

  • A deduction for your own IRA contributions

  • A Roth IRA

  • A non-deductible IRA conversion strategy

It may also be in your benefit to invest in a taxable account. There are significant benefits to the current and future diversification of holding a combination of taxable, tax-deferred (pre-tax), and tax-free (Roth) accounts.

You may also take advantage of the benefits available within a spouse or partner’s plan to achieve greater diversification and create a holistic investment strategy over the best options available to you over all of your plans.

Asset Classes to Complement Your Home Depot FutureBuilder 401(k) in an Integrated IRA / Roth / Taxable Strategy

It is important to not minimize the fact that the investment options provided do not cover the world of available options. By not being able to participate in markets, you may reduce return potential and increase volatility. See our Forbes post on how a retirement plan with basic options can cost a saver millions of dollars over their lifetime.

Below is a list of asset classes to utilize in your own accounts that complement our model recommendations:

  • Domestic Marketwide Index Funds

  • International Marketwide Value

  • International Small-cap

  • Emerging Markets Core

  • Emerging Markets Marketwide Value

  • Emerging Markets Small

  • Diversified, short-term bonds

  • Inflation protected bonds

  • Foreign Bond Index

Using an effective combination of the above investment categories in combination with your Home Depot plan can improve your investment experience. The benefits of increased diversification can result in a less volatile portfolio.

For more information on the above strategies and other investment ideas linked here is a complementary PDF version (Password = clearandfree) of our book Clear Investing, Intentional Investing.

#homedepot

0 views

NAVIGATE

FOLLOW

  • Grey Facebook Icon
  • Grey Twitter Icon

CLEAR.INVESTMENTS

is a service of

Clear Financial Advisors, LLC

39111 Six Mile Road

Livonia, MI 48152

 

Past performance is not indicative of future results. Differences in account size, timing of transactions and market conditions prevailing at the time of investment may lead to different results, and clients may lose money. Clients should consult with their personal tax advisors regarding the tax consequences of investing.

Clear Financial Advisors uses independent firms such as Betterment, TIAA, and TD Ameritrade, Inc. to custody client assets. Betterment, TIAA, TD Ameritrade, Clear Financial Advisors and the other entities named are separate and unaffiliated firms. Betterment, TIAA, and TD Ameritrade do not endorse or recommend any financial advisor and the use of the Betterment, TIAA or TD Ameritrade logos does not represent the endorsement or recommendation of any advisor. Brokerage services provided by TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. Used with permission.

 

© 2016 CLEAR FINANCIAL ADVISORS, LLC | Legal