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Tags: 401k balance | rebalancing | retirement savings

Don't Keep Checking Your 401(k)

Don't Keep Checking Your 401(k)
(Dreamstime)

By    |   Wednesday, 21 June 2023 04:02 PM EDT

Retirement experts say, do yourself a favor and don’t keep checking your 401(k) balance. You’re liable to make unwise decisions if you do.

As counterintuitive it may sound, the best thing is to check your 401(k) once every quarter to track your savings progress and rebalance out of overweighted holdings, The Wall Street Journal reports.

Take this case in point. While the average 401(k) lost 20%, or $30,000, to end 2022 at $112,572, as Vanguard data shows, the S&P 500 is up 14.85% year-to-date through June 21.

Had you heard the news about 2022’s decline, you might have yanked all of your money out of the stock market. Hearing about this year’s stock surge, you might go all in.

Obsessively checking your balance during bull and bear markets or extreme volatility can be hazardous to your savings and long-term financial security, says David Blanchett, head of retirement research at PGIM, Prudential Financial’s asset management division.

Those who constantly log into their accounts “will feel every up and down of the market and put themselves on an emotional roller coaster,” says Sarah Newcomb, a behavioral economist and founder of Thrive Financial Empowerment Center.

Seeing a large 401(k) balance could also prompt a retirement saver to become something of a big spender and possibly cut back on 401(k) contributions, Blanchett adds.

You may find it a hard habit to break; 62% of Vanguard’s five million 401(k) participants checked their 401(k)s in 2022, when the S&P 500 index tanked by 18.11%, according to FactSet.

By contrast, when the index soared by 31.49% in 2019, 18.4% in 2020 and 28.71% in 2021—between 66% and 69% of participants checked their balances.

Before peeking at your balance, Newcomb recommends, “Ask yourself, ‘What is it that I am really wanting?’” Then remind yourself of your long-term retirement goals and medium-term investment decisions.

Of course, rebalancing back to your original portfolio allocations—or even refreshing them—once or twice a year is always prudent. But getting a dopamine rush by checking your 401(k) daily can be very bad for your financial health.

© 2024 Newsmax Finance. All rights reserved.


StreetTalk
Retirement experts say, do yourself a favor and don't keep checking your 401(k) balance. You're liable to make unwise decisions if you do. As counterintuitive it may sound, the best thing is to check your 401(k) once every quarter to track your savings progress.
401k balance, rebalancing, retirement savings
344
2023-02-21
Wednesday, 21 June 2023 04:02 PM
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