Hint: it’s not what you need to know.
It may be tempting to look at your 401k account, especially when markets go haywire. Before you do that, you may want to ask what you’re looking for.
If it’s just idle curiosity and you have some time to kill, there’s nothing wrong with looking at your account and reviewing statements. However, if you intend to actually do something, you’d better be careful.
Your 401k statement shows your account balance. You already knew that, but it may be novel to consider what is missing on those reports: your retirement income. Sure, some 401k and IRA providers print a retirement projection, but many don’t (and they’re usually not customized to you and your life).
What About Income?
Retirement income is probably the reason you have a 401k. Decide whether or not you think that’s true. Then, decide if you have a 401k for any of the following reasons:
- To watch it go up and down
- To only see it go up
- To “make money”
- To do better than your neighbors
- To be a smart investor
- To not make mistakes
It’s your money, and you can have any number of goals. Who’s to say if any of those goals are bad ones?
For most people, retirement income is the goal that matters. When it’s 3AM and they’re worried about money, they may be afraid of the market going down further. At 8AM, after a cup of coffee (and a muffin to help make better decisions), they’ll hopefully realize that the real problem is retirement income.
Looking at your 401k statement probably won’t help you get a handle on retirement income. For younger and/or aggressive investors, looks may be deceiving; a bad market is a good thing if you’re buying and not looking to retire anytime soon.
An account balance going up and down hardly tells you what you need to know. Zoom out and think about all the moving parts before you decide to do anything. Whether or not you take action, you’ll improve the chances of doing the right thing.