401k’s – Do I Have To Look? (NEW)

401k's - Do I Have To Look?

You’ve got your 401k set up—great! But how often should you check it? Whether you never look, glance occasionally, or monitor it regularly, each approach has its pros and cons. My advice? Find a balance—start checking more often than you currently do. After all, how can you reach your retirement goals if you’re not sure where you stand?

Ken Zuck

Owner of Swiss Bookkeeping

Now that you have your 401k started and maybe it was many years ago, HOW OFTEN SHOULD I LOOK AT IT? Let’s start with the basis premise: you have a 401k…done.

Now the fun question:

Which one are you?

#1 “I never look at my 401k”. You might say things like “I’ll look when I need it…when I retire.”

#2 “I look only at tax-time or when statements are sent to me. I keep forgetting about it.”

#3 “I’ll look at my investment balances daily or monthly or at least on a regular timetable.” You may say something like “it gets me super excited.”

OK, so, did you pick one of the above? Probably so. Let’s break it all down.

Pro's & Con's

If you chose #1

So, you never look? Ok, so at least you have a 401k, right? There is a lot to say about “get-it and forget it.” Believe it or not, many financial planners fall in this category! And for good reasons. They are not swayed by the economy, emotions, nor how investments are gaining or losing. It’s my opinion that much of the “ups and downs” of many stocks are simply based on “feelings” and not the actual economics of the company.

I believe thatabout 90% of Americans are ancious about money to some degree. If that’s true, could that be one reason you don’t look? “Out of sight…out of mind?”

The problem with this way of thinking and investing (never looking) is that it doesn’t drive you to invest more! In fact, if you are contributing only 10%, you should change it to 11% right away, then 12% the next month, etc. Do it incrementally so that it’s not a blow all at once to your budget.

If you chose #2

If you only look at your quarterly or annual statements, that’s OK. They are sent for helpful reasons, but learning how to read them is another issue. They are a reminder of what’s happened only in the PAST. They don’t help you with any long-term goals. Positively, they do allow you to see how much your employer gave you in free matching money (which you might have forgotten about). Statements also help you to see your investment gains in one “photo” snapshot. That should be an encouragement to you.

However, you might not know what to do with that information from your statement (another blog topic). You probably look at your total, take a deep breath, and lay it aside.

If you chose #3

If you’re one of these people, you’re probably a person that keeps a budget (yes, I’m a proponent of keeping a budget.) Or, possibly you’re a “numbers person” and like to keep a pulse on your own money and also your investments and you are thrilled with even tiny gains. This option is not for those of you who are emotional-investors who watch the stock market keep taking hits and respond by pulling money out of the market.

What is MY choice and why?

You might ask “what do I do?” I personally fall into #3 above, not because i’m a “data freak” (OK, that’s true), but I like to keep a graph of my investments so I can visually see my retirement track, but not react to it.

I look way more than most people because it keeps me on track with my goal as i’m getting closer to the finish line. I think of it like you’re on an actual train track (yes, i’m a visual person). You don’t need to keep steering; you just need to make sure you’re on the right train track still.

I can also more intelligently point at the data of retirement. When I look at the graph trend, I don’t get discouraged when the market goes up and down because I know i’m heading on track.

My suggestion to you, whether you picked 1, 2 or 3

So, what about you? What should YOU do? Here’s my suggestion: slide your response toward looking more often than not, however that translates for you.

– In other words, if you look at it once a year, then slide it to looking quarterly.

– If you look quarterly, then look monthly.

– If you never look, slide your answer to look at least annually.

The bottom line

Many people I speak with have no idea how much they even have in their 401k. Can you believe that? How can you reach a goal if you’re not even sure if you’re in the game?

I recently had a financial advisor, that I was interviewing, who told me “Ken, don’t do this chart thing! It will make you invest emotionally.” Well, that is partially true; most people who invest emotionally will jump out of the market at the first sign of decline which is counterproductive and can lead to loss of future returns. On the other hand, over confidence (the other emotion) can lead to unwise risk-taking. Both are poor methods of investing.

Instead, invest intelligently for the long haul…and yes, that takes knowledge. Invest wisely!

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