Retirement Savings: Leave It to the Experts…and Leave It Alone!

Making the decision to start contributing to a 401k plan isn’t easy, but it is a “yes” or “no” question. Once you decide to go with “yes” (which I hope everyone will do), then you have to decide:

  • How much to contribute?
  • How to invest that money?

In most cases, we know the factors that will impact how much we contribute – our salary, our bills, our spending, etc. Unless you’re very familiar with the stock market, though, deciding on how to invest your contributions (hopefully with an employer match) can be much more difficult. Take the first step – start small and increase your amount over the years. When you get a raise or increase in salary, dedicate some of that to your retirement.

Most 401k plans include target date funds – also known as lifecycle or age-based funds – which are essentially investment portfolios that take on a more conservative risk profile as the target retirement date gets closer. These funds are actively managed and their diversification is rebalanced at least annually which make them ideal for anyone unfamiliar or uncertain about investing in the stock market. And, for 401k plan investors, there are almost no disadvantages to investing in target date funds.. So, if the thought of picking between a large-cap value and a mid-cap growth fund is overwhelming, leave the fund choices to the experts and consider going with a target date fund.

“Retirement is not in my vocabulary. They aren’t going to get rid of me that way.” ~ Betty White

For most of us, retirement is in our vocabulary and we need to make sure there will be enough money when we need it. Whether you make your own investment choices or leave it to the experts, it is important to leave your money alone. According to Forbes, the “do nothing” strategy is usually the best way to go. No one is saying that you shouldn’t keep an eye on your investments, but maybe don’t check your balance every day and remember that you’re investing for the long-term – your retirement! This not only means limiting the buying & selling of funds, but also taking loan and hardship withdrawals only when absolutely necessary. Remember compounding interest? Any withdrawal from your 401k plan will reduce the benefits of compounding interest plus may result in double taxation in the case of a 401k plan loan.

America Saves Week is a great time to look at increasing how much we’re saving and evaluating if we need to make any investment changes. It’s also a great time to remember that the experts are there to help us with the heavy lifting and that we’re saving for our retirement which, for many of us, is a long way away.



The SHRM Blog does not accept solicitation for guest posts.

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