I have asked the same company 401(k) retirement plan investment management question for both clients and prospects over the last several months. The historic investment returns of 2017 require each individual investor to give at least a passing thought to their answer.
Last week, Nick Maggiulli, who writes for Of Dollars And Data, wrote a very timely article on the same question.
The question asked is, “When do you sell?”
In my experience, the initial shock of that question is too much for my existing company 401(k) investment advice clients. Most individual investors never think about stock market risk. But they do understand dollars and percentages.
The question I ask is, “How much money in your company 401(k) retirement plan account can I lose before you fire me?”
If my client hesitates at all with their answer, I help them by throwing out percentages… like 10, 20, or 30%. At that point I can see in their faces the mental arithmetic taking place in their minds.
The year-end investment returns for 2017 will be historic. Individual company 401(k) retirement plan balances hover near all-time highs.
After almost nine years of straight-up stock market gains, don’t forget this very important point. Retirement investment is never about how much you make, or what your investment gains are over a given time period. You are most likely not going to retire on your year-end 2017 company 401(k) balance.
Instead, the most important part of retirement investing is how much of those investment gains you keep. You have a long way to go in your working career.
When you get a little down time over the year-end holiday, pull out your company 401(k) retirement plan statement from September 30, 2017. Then ask yourself the same question; how much money are you comfortable “giving back” in the next great stock market crash.
Dollars or percentages don’t matter. The most important thing is that you have taken the first step in preserving your company 401(k) retirement plan account balance.
Ric Lager
Lager & Company, Inc.
