Here’s this month’s New Jersey personal finance question: Do you know how your 401k is invested today?
Think quick – how is your 401(k) currently invested?
If you’re like most people, you have not a clue.
According to a CNBC survey, 46% of 401k account owners do not know what they are invested in (Ianucci, 2023). Most people pick a few funds when they open their 401(k) account, and then “set it and forget it”. While this may seem innocuous, this could have a catastrophic impact on your retirement.
And what happens if you make no investment elections at all?
By default, funds held in 401k accounts are typically invested in target date, asset allocation, or ultra-conservative investments based on government regulations. In many cases, these investments do not take into account your unique risk-to-reward preferences and time horizon.
The investments available vary from plan to plan, but generally there is a menu of options to pick from within your 401k plan. Assess your willingness and capacity for risk and make selections that align with this profile.
How do you make sure you know what your 401k is invested in?
Get online access and review your investment allocations periodically, at least every six months. It’s also a good idea to look them over in the event of a major life change – marriage, birth of a child, etc. – as your risk profile may vary under these circumstances.
Send me a message if you would like help uncovering the mystery of your 401k account.
-Shaun
Sources
Ianucci, Greg. 2023, September 7th. CNBC. Almost half of 401k Investors Clueless about their Investments. https://www.cnbc.com/2023/09/07/almost-half-of-401k-investors-clueless-about-their-investments-cnbc.html