Are you having a “401(k) freakout”?

Recently, a 401(k) participant provided me with her most recent 401(k) statement. The one dated June 30, 2022

She was shocked with her current 401(k) balance. In her words, she was “Having a freakout about my 401(k).”

She had recently signed up for my LinkedIn 401(k) Advice Newsletter. Why did her 401(k) drop so much in value over the last few months?

As I always do when helping a new 401(k) investor, I started by asking her lots of questions. Turns out, she did not know very much about her 401(k).

For example, she did not know what he owned – what stocks, bonds, and mutual funds she was invested in. She did not know what other mutual funds were available. She did not even know what annual fees he was paying.

To be honest, many 401(k) participants do not know. Studies have shown that many 401(k) participants have no idea what is even in their 401(k).

What types of mutual fund options are available to them?

What type of mutual funds do they own now?

How much stock and bond market risk they are taking on?

Most 401(k) plan providers do not provide information on these critical issues. Or they make the information hard to access. Other times, it is because people do not have time to look. Or they do not know to look.

Here is what most people do know about their 401(k):

· A part of their paycheck gets invested in it every month.

· Their employer will match at least a part of their monthly contributions.

·By the time they are ready to retire, they will have accumulated enough to live out their golden years.

Here is what everyone should know:

· Exactly what stocks and bonds are owned in each of their 401(k) mutual funds.

· How your 401(k) has been performing…and how it is likely to perform during market volatility. (Sometimes, the mutual funds chose during a favorable market are the exact wrong ones to own during a bear, and vice versa.)

· How much you are paying in annual mutual fund fees.

· Whether your 401(k) plan has brokerage window. This account provides access to a far wider range of investments. At lower annual costs than the limited default 401(k) mutual fund menu.

· When it is time to preserve your 401(k) principal. This has been especially important the last few months.

I ask every 401(k) participant these same questions. I will not mince words: It can be very risky to be in the dark about your 401(k). The June 30th quarterly statements are a prime example.

All uncertainty about your 401(k) should always made clear as soon as possible. That is especially true during times of major market volatility like we are in right now.

I can help you improve your 401(k) investment management decisions. It takes only a few minutes to answer your most important 401(k) questions. And to clear up any uncertainty about your 401(k).

Are you surprised or confused by your most recent 401(k) statement? Now is the perfect time for a second opinion. Or if you do not know any of the following:

· What you own.

· Why you own it.

· What other options are available?

· Whether your current mutual funds are appropriate for the stock and bond markets now.

· What you are paying in annul mutual fund fees for the investment performance you are getting. Or not getting.

You can easily avoid any “401(k) freakouts” in the near or distant future. Now is the time to determine if you are in the wrong 401(k) mutual funds. Based on either subpar investment performance or excessive annual fees.

Ric Lager
Lager & Company, Inc.

MEET THE AUTHOR

Ric Lager is a Registered Investment Advisor specializing in 401(k) advice. He helps 401(k) participants improve their mutual fund decisions. The 401(k) SDBA (self-directed brokerage account) is a large part of his practice.

Ric provides independent, third-party fiduciary investment advice. He does not sell 401(k)'s. Ask him about the dollar cost of owning the wrong mutual funds in your 401(k) account.