What to do with your 401(k)
Earlier this year, your 401(k) probably got pummeled, like everyone else’s. Although its value is likely higher now, many people are wondering what to do, and whether their money is positioned correctly. If you’re one of them, here are the things I’d consider:
When do I need the money? Or, more precisely, when are you planning to retire? The closer you are to retirement, the more essential it is that you get some guidance and make the correct decisions, because you have less time to recover if something goes wrong.
What is my risk tolerance? This is determined partly by your personality, but also by your cash flow needs, and your overall plan. Risk tolerance is important because it offers an indication of how much downward fluctuation can you tolerate before you get scared and bail out. Bottom line: There is no free lunch. You have to strike a balance between the return desired, and your acceptance of account value fluctuations. Accepting larger fluctuations generally gets you better long-term returns. It’s that simple. If anyone promises you great returns with no risk, run the other way. Take my free risk tolerance assessment HERE.
Do I have a plan? I’ve found over the years that if people have an actual written plan, they have a better understanding of how much (or how little) they might be impacted by market volatility. They also tend to feel more confident if they have an experienced advisor, who can guide them through the volatile periods by helping them stay focused on the long-term plan.
So, if you’re not totally sure about any of the questions above, or you’d like to get a second set of eyes on your investments, schedule a time to come see me for a cup of coffee, or a game of pool and a beer. There’s no cost, no obligation, and everything we discuss is 100% confidential. Go to my calendar to schedule a visit or a phone consultation.
If you have questions about an old 401(k) from a previous employer, click HERE.