When your cell phone battery needs recharging, you find a place to plug it in. When the check engine warning light goes on in your car, you take notice. When a routine doctor visit finds a condition that requires immediate follow-up, it gets your attention.
The “cost of doing nothing” in each case is clear. There may be more severe consequences in the future for decisions you made in the past. The same goes for the decisions you are avoiding in the present.
The last several years of stock and bond market investment gains have lulled individual company 401(k) retirement plan participants to sleep. “Set-it-and-forget-it” has been a very successful investment strategy.
The stock markets are long overdue for a meaningful correction. Interest rates are already going up and are likely to continue in that direction. The clock is ticking on one or both of these markets to change direction.
Here is a short list of reasons that continuing to “do nothing” in regard to the preservation of your company 401(k) retirement plan account principal could be a very expensive lesson.
Stock and bond market losses can escalate quickly. Over your investment lifetime, the stock markets have risen gradually. Interest rates have fallen to near all-time lows. That is the good news.
The bad news is that very often the markets change suddenly. Both the stock and bond markets can give back several years of investment gains in a matter of weeks.
Lack of a stock and bond market risk management game plan causes emotional decision-making. Most individual company 401(k) retirement plan participants delay making investment decisions until stock market losses are front page news. At that point, they make emotional decisions that make their company 401(k) retirement plan losses worse.
Catching up may be impossible. How many years did it take you to recover your stock market losses from 2008-2009? Most individual investors don’t even know. The most popular stock market averages took several years to “get back to even.”
You most likely don’t have the time left in your working career to catch up if the stock markets go through the next historic decline. The best investment management strategy is not to fully participate in the decline in the first place.
Preventative actions are cheap and take little time. A $50 oil change can save thousands of dollars of engine damage. A paper statement or online review of your current company 401(k) retirement plan mutual funds takes a few minutes. Tens of thousands of dollars of your retirement savings are at risk now.
Awareness of improving your company 401(k) outcome. At stake is the preservation of the last several years of your annual company 401(k) retirement plan contributions, company-matching contributions, and investment gains. That should be your number one investment management priority right now.
Individual company 401(k) retirement plan participants should realize that 100% of the independent resources and unbiased information that you need is available to you. There is no reason to face the historical realities of stock and bond market on your own.
We live in a fast-paced and constantly changing world; much of which has both and short and long-term effects on your retirement savings. Continuing to not pay attention, maintaining a “buy-and-hope” strategy or “doing nothing” is increasingly dangerous to your retirement well-being.
Ric Lager
Lager & Company, Inc.
