Issue #149: Keep calm and leave your 401(k) alone

June 29, 2022 • Issue #149

Hi y’all —

I have a problem with Crockpots, and it’s not that one killed my boyfriend Milo Ventimiglia in This Is Us. 

I’m just incapable of letting them do their job.

No matter what I’m making in my slow cooker, whether it’s my favorite spinach tortellini soup or my amazing apple cider, I can’t seem to let it sit. For however many hours the dish is cooking, I’m messing with it — walking into the kitchen, opening the lid, peeking in, conducting a taste test, adding a little more garlic or a shot more rum. I know the whole point of a Crockpot is to set it and forget it, but I can’t seem to stop tweaking the recipe. I want the final product to be PERFECT. 

I have a similar issue with my retirement accounts. Like with my Crockpot, I’m aware that I’m supposed to let them run in the background, but I get antsy. I want to look at my 401(k) balance, especially when I read about catastrophic market events. I feel compelled to make sure everything’s OK in there, simmering away nicely like it should, for Future Retired Julia Glum-Ventimiglia.

How often should I check my 401(k) balance?

According to Leanna Devinney, vice president and branch leader at Fidelity, that’s an “age-old question.” Never checking my 401(k) at all is probably a bad idea, but there is a danger in checking it too often.

To a degree, I need to monitor my 401(k) — and my individual retirement account (IRA), for that matter — in order to stay informed. Peeking at my balance(s) can help me determine whether I’m on track for retirement, whether fees are eating up too much of my money, whether I’m complying with IRS rules about contribution limits, et cetera.

“It’s critical that we participate in and contribute to our own retirement plans,” adds Heather Winston, director of financial planning and advice at Principal. “When you're checking that balance, it gives you the opportunity to get a quick, point-in-time sense of how you're progressing toward that goal and how your investments are faring.”

To that end, Winston recommends checking my 401(k) balance a minimum of twice a year. Every six months or so, I can go in, review my investments and rebalance my portfolio.

But it doesn’t need to be a daily thing.

The markets are constantly shifting due to world events, so my balance is always going to be fluctuating. Volatility is normal, especially when my asset allocation is aggressive (like it tends to be when I’m younger and further away from retirement).

Investing for retirement is a long game: It’s important that I don’t get spooked or respond emotionally to big swings. And staying the course is a lot harder to do if flashing red numbers and scary downward arrows are staring me in the face.

“If you’re looking with a lot of frequency, you may then take action that's unnecessary,” Winston says. “You might rebalance assets excessively. You might make a knee-jerk reaction to what you're seeing — ‘Oh, my portfolio is down; I’m going to sell everything and go to cash’ — without a plan on when to get reinvested.”

It’s “ignorance is bliss” in action. If I hadn’t looked, I would never have known… and never would have messed with my investments. I'm 30 years from retirement at minimum, and most upsets will smooth out over time anyway.

“There's always a headline out there about the world ending,” says Tyler End, co-founder of Retirable. “There are going to be a lot of ups and downs, and it's best to just ignore those.”

So what’s the sweet spot? End suggests checking how my 401(k) is doing once a quarter, aka four times a year.

If I get in there and I’m really unhappy with the results, he says to take a deep breath and step away from the keyboard. I should investigate what’s happening in the world — “maybe Russia started a war with Ukraine and triggered a downturn in emerging markets,” for example — and carefully evaluate whether it’s time to make a change. I may even want to talk to a financial advisor.

I might be less likely to tweak my 401(k) if I feel secure in the fact that I have an overarching savings strategy that matches my goals and time horizon. Devinney suggests setting up three buckets: an emergency fund containing three to six months’ worth of essential expenses in cash, an intermediate bucket focused on objectives like buying a house or going on vacation, and a long-term retirement portfolio that’s oriented for growth.

Knowing that I have several plans in motion to accomplish several goals can take the pressure off the 401(k) figure that confronts me whenever I log into Fidelity — and give me the confidence “to ride out these turbulent times,” Devinney adds.

THE BOTTOM LINE

(but please don't tell me you scrolled past all of my hard work)

I need to stay on top of my 401(k) and IRA balances, but it’s risky to check too much. I may be tempted to make changes simply because I’m tracking day-to-day fluctuations that will even out in the long run.

Two to four times a year is enough for now. But as my assets and the quantity of my investments grow over time — and I get closer to retirement age — I'll likely start looking a bit more frequently.

And that’s OK.

“It's kind of like Goldilocks [and the Three Bears],” Winston says. “[Find] that ‘just right’ that middle ground — what’s comfortable for you as an investor and what makes sense given everything that's on your list of priorities.”

VIA GIPHY

RECEIPT OF THE WEEK

check out this wild celebrity purchase

VIA INSTAGRAM

Actor Al Pacino: Godfather legend, triple crown winner and… secret Shrek stan? A few months after being spotted in a photo with an ogre-filled phone case, Pacino revealed in an interview that his 21-year-old daughter was behind the case, which goes for about $13 on Amazon. I guess Pacino’s got layers. Like an onion.

INTERNET GOLD

five things I'm loving online right now

1	Allow me to be serious for a sec. Last week, the U.S. Supreme Court overturned Roe v. Wade, giving the power to regulate abortion to individual states — and, in doing so, setting into motion a series of financial consequences for people who can become pregnant. Here’s a piece I wrote outlining 12 ways abortion bans hurt Americans financially — and here’s where you can donate to support access.
2	TFW you buy a book, do some research and then… find it in an 18th century painting??
3	I can’t stop looking at these old-school computer graphs, which are super retro and strangely beautiful. Gives me KidPix vibes.
4	Bear cubs in hammock. (Well, kind of.)
5	A new book about the painter Vincent Van Gogh explores the “everyday objects” in his works — and what we can learn from interpreting them. For example, the jug in which his famous “Sunflowers” sit could not actually support the weight of all those buds. “Van Gogh was not painstakingly copying a pot of sunflowers beside his easel,” correspondent Martin Bailey writes in The Art Newspaper. “Instead he probably put the two elements together in his mind, possibly aided by having an empty pot and a separate bouquet in a more practical vessel near his easel.”

401(K)9 CONTRIBUTION

send me cute pictures of your pets, please

VIA ALISON TOBIN

Meet Rover, a pup who is smiling because he knows to check his retirement awwwcount balances once a quarter.

Now that I've railed against Crockpots, I'm getting hungry. Maybe I'll fix myself a plate and watch a couple dozen Jess x Rory edits on YouTube.

See you next week.
 

 
P.S. I've been bad at replying to emails lately, but I love to get feedback from y'all! Scholar John wrote in to say that he's actually been able to find a lot of cheap concert tickets on Groupon, of all places (he also suggested buying lawn seats and upgrading when I get to the venue). And on shrinkflation, Scholar Cathy said that unit pricing can be confusing — sometimes it's listed in ounces, in grams or for the whole item — so I have to be careful in the grocery store.

P.P.S. How often do you check your 401(k)? What’s the best song on the Shrek soundtrack? Can you get into a hammock gracefully? Sound off at julia@money.com or @SuperJulia on Twitter.

This newsletter is free because Money earns a commission when you click or make purchases from the links in this email and on our site. We also receive compensation for some of the products and services featured in this message. Offers may be subject to change without notice. Learn more about how we make money.

Privacy Policy • Advertise With Us • We're Hiring!

To stop receiving these emails, unsubscribe or manage your email preferences.

Copyright ©2022 Ad Practitioners, LLC. All rights reserved.

Metro Office Park Calle 1, Building 7 Suite 204, Guaynabo, Puerto Rico 00968, USA