Should You Be Worried About Your 401(k)?
Ernie Neve, CPA
August 3, 2021
If you follow the financial markets – even for a company 401(k) – you’ve probably noted that there are some challenges going on right now.
Not only are the markets up and down on a near-daily basis, investors are freaking out about crypto-currency, financial naysayers are encouraging you to invest in precious metals and bonds, and – more than usual – folks are acting crazy about investments.
Here’s the funny thing, though: this seems to happen every year from May to roughly October.
Sure, last year EVERYTHING went crazy with the COVID-19 lockdowns, so the data we can use is at least two years old, but the truth is, there is evidence that the stock market, on average, tends to underperform in the six-month period between May and October.
So here’s my advice, if you’re worried about the market’s and their effect on your portfolio: don’t worry about it too much. In fact, I’ll go a little deeper and say that, if you’re worried about the performance of the mutual funds in your 401(k) – especially in the historically weak period from May-October – then that is evidence enough to look at other ways to invest.
Or, at the very minimum, alternate strategies for building wealth NOT based on the stock markets or a company-sponsored retirement plan.
Let me give you an example…
-Real estate – in nearly all its forms – is doing very well right now, and there’s no reason to believe it’ll cool down anytime soon. If you’ve got rental properties and aren’t pleased with the returns right now, chances are, you can get top dollar selling them in the current atmosphere.
-Rethinking your debt load is another great idea right now, especially if you may need to reallocate some cash to refinance your home loan or pay down some credit card debt. While you might not think of this as “making more money,” the truth is, you are doing just that by lowering your interest payments in both the short and the long term.
-Another smart thing to do? Go ahead and contact your credit card companies and ask for an increase in ALL your credit limits. Note – I’m NOT telling you to USE that money, but simply having a higher credit limit is going to raise your credit score and that can help you negotiate potentially lower rates for any future asset purchases.
The point in all this is that no matter what the naysayers and talking heads in the press are discussing, you ALWAYS need to be putting your money to work for you. It might be something as simple as verifying your W4 information has the correct deductions being taken out each pay period or determining the “correct” amount of money to be investing in your company’s 401(k), but making money is a habit, and it’s one that far too many people don’t allow themselves to be great at.
Let me tell you something: just like losing weight or getting in shape, learning to make your money work for you is something you can absolutely learn – and one that ALWAYS makes people smile.
I’m always happy to try to offer some guidance in this type of conversation, so don’t be afraid to schedule a time to discuss your ideas with me.