Stop Checking Your 401k so Often.
The world woke up this morning to dire headlines about the global economy. Japan’s stock market is in free fall . NASDAQ is plummeting . A possible US recession is looming . Increasing bad news may trigger the impulse to open your retirement accounts to assess the damage. But I’m begging you now more than ever: stop looking so damn hard at your 401k.
When troubling stock market news breaks (see all the latest economic news at the moment), it’s natural to obsess over how your retirement savings are doing, but don’t do it, even if the balance is clearly posted on your dashboard. your banking application. Just ignore it. That’s why.
If you’re not of retirement age, your 401(k) is on hold.
Jim Kinehan, Senior Advisor at AFS 401(k) Retirement Services, LLC, has been a financial advisor for many years. He advises you to stop thinking of your 401(k) as money in the bank. Instead, “think of it as a way to secure a salary in retirement,” he says. You’ll stop working, your paychecks will stop coming in, and you’ll be able to go back to the money you set aside through your employer’s plan. This is money for later. What the balance looks like now doesn’t matter unless you’re currently at or very close to retirement age.
It’s hard to remember this when you know that a falling stock market means a fall in your balances. It is natural to want to constantly check the extent of the damage, especially in times of economic turmoil. But according to Kinehan, this will only do you harm. “It can be fun when the stock market is doing well and your investments are doing well,” he admits. “However, the stock market does not always go up.” And whether it’s up or down today, you’re in it for the long haul.
How often should you check your 401k?
Kinehan said there are other reasons you might want to check your 401k besides looking for the thrill of increasing the balance or waiting for it to drop, such as changing your contribution amount or updating beneficiary information.
That’s okay—you should certainly spread out your investments , but once you do, you should try to forget about it unless life changes (rather than market volatility) force you to change your plans.
Otherwise? Do this annually, Kinehan said. In fact, as much as possible, only make changes annually, and do so with the help of a financial advisor if you can .
What can you do to feel better and stop checking your 401k?
Kinehan cautions against driving yourself crazy by focusing on daily balance. Instead, take back control by looking at the big picture of your finances. Again, find a financial advisor or ask your employer if they offer access to someone who can answer your questions. (If they offer a 401k plan, they should do it.)
“Talk to a fiduciary financial advisor. “‘Fiduciary’ is the key word here because it means the financial advisor will act in that person’s best interest,” he says. “A lot of times people look at headlines about a stock market crash – it’s really meant to be a shock. They are trying to get people to click on links and want their attention to be drawn to the screen. This is not advice you should follow in your retirement accounts.”
Simply put, don’t make financial decisions based on an article, social media post, or gut feeling. Talk to an advisor who has the knowledge and experience to understand market fluctuations and can guide you with a little more peace of mind. Do this once a year. Otherwise, stop logging in.