Remember your 401(k)

Filed in archive on January 14, 2006

Yourwayahead.com recently reported on an article from Seattle Post ?Intelligencer concerning our 401 (k) accounts.

Here is what they had to say:

"For as long as 401(k)s have been around -- which is now 25 years -- workers in these tax-deferred retirement plans have been encouraged to stay the course."

"That's sound advice. Those who have continued to plow money into the accounts have seen their balances recover steadily from the recent bear market. But there is a big difference between staying the course and simply starting and then forgetting your 401(k) indefinitely -- which is what a lot of us seem to be doing."

"A recent study by Hewitt Associates, the employee benefit research firm, found that from 2000 to 2004, only 40 percent of 401(k) participants touched their accounts even once. In other words, three out of five of us didn't tweak our investment strategies at all."

"On the one hand, it's good that workers aren't trying to time the market," said Lori Lucas, Hewitt's director of retirement plan participant research. "But on the other hand, it's not good that participants are failing to rebalance their accounts."

"It's important for all investors to rebalance -- a fancy term for resetting your mix of stocks and bonds to ensure that it still conforms to your original plan -- at least every year or two, financial planners say. Otherwise, your portfolio will rebalance your investments for you -- and not necessarily in a good way."
This is excellent advice. We on the one hand need to ignore the day-to-day fluctuations that come with investments, and at the same time make sure we give an occasional look to see if there is a reapportioning needed.

If we take care of our finances in this way, we should be able to get consistant gains over the long haul.

To read the full article go here