Worker checking 401(k) balance on computer

Stop Checking Your 401(k) Balance!

The ongoing volatility in the stock market and relentless onslaught of negative economic news is raising investor anxiety. If you are feeling worried about your 401(k) performance, let me offer you some advice: stop checking your account balance!

Most 401(k) providers allow participants to easily check their account online. But there are several good reasons not to check on your balance during these volatile times.

For younger workers: You are investing for the long-term. Market volatility is a normal part of investing and historically markets improve in the long run. Stay focused on the future and keep contributing to your plan. Why do you need to check the balance on an account you won’t tap into for 20 more years?

For older workers: Yes, if you are close to retirement then your account balance and the market conditions when you begin taking distributions are important. But looking at your dropping account balance without talking to a financial advisor can cause you to make mistakes. Before you panic, talk to a fiduciary financial planner who can help you plan for your transition into retirement.


Are you your own worst enemy?

There are behavioral reasons not to constantly check your account too. Research from behavioral economists Shlomo Benartzi and Richard Thaler found that the more often a person checked their 401(k) balance, the lower their long-term returns would be. The reason seems to be a correlation between the frequency of seeing market declines and the decision to avoid investing in stocks.

Based on historical market data since 1929, if a person checked their account every day, the probability of seeing a market decline was 46%. For those who only looked once a year, the probability of seeing a decline dropped 25% and for those checking every five years it dropped to 10%.

Psychologically, the pain of loss is stronger than the happiness of gain, something behavioral economists call “loss aversion.” Those who viewed more market declines had stronger loss aversion and were more inclined to sell out of stocks…the best investments for long-term gain. This combination of loss aversion with frequency is called “myopic loss aversion.” The data in the studies was strong enough that Benartzi concluded that investors should check their account as infrequently as possible until they were nearing retirement and had to begin planning for the transition.

Here’s what we suggest:

  • If you’re feeling worried and just want to sell out, give us a call! Investing is emotional business and one of the benefits of working with a Christian financial advisor is having access to an objective opinion. We will revisit your goals and work with you on how to plan for them.
  • If you’re 10 or more years away from retirement, check your account as infrequently as possible. Checking the balance every day will not help you invest for the long-term.
  • If you do log in to your 401(k) participant portal, use it to sign up for helpful features like auto-escalation which will raise your contribution incrementally every year helping you automatically save more for retirement.
  • If you’re close to retirement, give us a call. Our team has experience and expertise to work with you and help you plan for your transition to retirement – no matter what the market is doing. Take advantage of advice from a fiduciary working in your best interest.

If your organization offers a Kingdom(k) or Kingdom(b) retirement plan managed by Beacon Wealth Consultants, then we are your advisor! Reach out to us with your questions or concerns.

At Beacon Wealth Consultants, we are active managers with a goal to help our clients and Kingdom(k) and Kingdom(b) participants to become better stewards and to plan successfully for their long-term goals. Avoid hasty market-timing mistakes and stop checking your account balance. If you’re worried, give us a call, we are here to help!