Check Your 401(k) Quarterly? You May Be In for a Big Shock

Some people check up on their investments on a weekly basis. Others do so on a monthly basis. But if you’re more of a hands-off investor, you may not check up on your 401(k) plan until your next quarterly statement arrives in the mail.

Checking on your retirement plan quarterly doesn’t mean you’re being neglectful. And the reality is that many 401(k) savers have their money allocated to different index funds or target date funds, both of which are pretty hands-off investments. As such, there’s really little need to check up on those accounts weekly or monthly.

Image source: Getty Images.

But when your latest 401(k) statement shows up, you may be less than thrilled with the number you see. That’s because the stocks have been on an extended slump due to various factors ranging from inflation to recession fears to the war in Ukraine.

If your 401(k) statement arrives at the end of the quarter and you see that your plan value is down substantially, your first inclination may be to panic. But here’s why you shouldn’t.

Try to keep calm

If you’ve been tracking your 401(k) on a weekly basis, you’re probably well aware of just how much money it’s lost over the past few months. But if you’re gearing up to compare last quarter’s balance to this quarter’s, you may be in for an unsettling reality check.

Before you panic, though, realize a few things. First, you’re not alone. Many investors’ portfolios are down substantially since the start of the year, so don’t assume you’re in that boat because you did something wrong or make poor investments. That’s just the direction the broad market has gone in.

Second, there’s no need to assume your retirement is doomed due to a lower 401(k) balance if that milestone is many years away. The stock market has a long history of recovering from downturns and rewarding investors who stick with it in the long run. So, while the losses you’re seeing in your portfolio may seem substantial, if you’re not retiring for another 15 years, you have more than enough time to recover.

But to stage that recovery, you’ll need to largely leave your portfolio alone rather than dumping losing investments. If you sell now out of fear, you’ll only lock in losses.

However, one change it could pay to make in your 401(k) is to shift over to lower-cost investments. That could mean swapping an actively managed mutual fund for a low-fee index fund.

But for the most part, if your 401(k) setup was working for you until the start of the year, then you may not want to make many, or any, changes. The reality is that the broad market has had a rough number of months, and a lower 401(k) balance doesn’t mean that you’ve mismanaged your investments in any way. If you do your best to keep calm and stay the course, there’s a good chance you’ll be a lot happier with your 401(k) statements in the future (though perhaps not the near future, since we could be in for many more months of volatility).

The $18,984 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $18,984 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published. Required fields are marked *