It has been very interesting to watch television over the past couple weeks as the stock market has declined. Many of the pundits on TV say that the 401(k) is a long-term investment so really there’s no need to worry about what happens in the short term. The funny thing is that many of them are saying if you’re 35 years old, you’ve got another 25 years until retirement and it really isn’t worth looking at it anyway.
Why in the world would anybody want to do anything like that? Why wouldn’t you look at your 401k statement? Certainly, what’s pretty funny is if you’re driving up the road and you see a cop car and an ambulance and a whole bunch of wrecks, you’re always wondering what’s going on ahead of you. You say to yourself that you’re the one person in traffic who wouldn’t look at what happened with the accident on the side of the road, and you just want to drive and get to your destination. Invariably, the closer you get the more you want to look just to see what happened. It is almost impossible not to look even for a split second just to say you saw the wreck just like every other driver on the road. It’s somewhat like that with your 401k plan. If you don’t want to look because you know it’s down and you know there’s bad news, you have to take a peek. You know it’s probably going to be worse than you think it was before you opened that statement. But yet, you still must open your statement. It’s your retirement and if you don’t take control, the government isn’t going to bail you out. Most important, are you going to want to be that one person that can’t explain what happened with the accident on the side of the road. Especially if it is your retirement.
This is one of those times where many of the pundits on TV will say something to the effect of have a balanced asset allocation, but this is the one time out of many years where literally every asset category is down. The stock market is down in the United States, down in international, and it’s down in emerging markets. It is also down in real estate, down in bonds. Basically it is down everywhere. So what does this mean? This doesn’t mean don’t look at your 401k statement. It means you better get smarter than ever before on how to manage your 401k. To set it and forget it just won’t work. To put it all in the S&P 500 just won’t work. Think about the fact that he S&P 500 is actually down over the last 10 years. If you did a buy and hold strategy, you’re actually down. This is the time I would really challenge your employer to set up a self-directed brokerage account so you’re not limited to a finite number of choices in your 401k, so you can more judiciously manage your 401k plan. One things that’s true is it’s your retirement, and you better take control of it and you better look at your financial plan to figure out exactly what you need to save, or you just might find yourself living like the infamous Saturday Night Live character Matt Foley and “retiring in a van down by the river”.