Recently I lamented to my husband about the massive nose dive our retirement accounts have taken. Contributing to a retirement account, whether it was my 401k at my previous company or my current Simple IRA, has always been a priority of mine. "I worked my %$&# off for that money" , I said to my husband, referring to my personal account. His reply to me was "why don't we get out of the market until the economy gets better." He continued, "why are we still putting money into our retirement if things are that bad."
His questions were fair especially since I was just complaining about our losses, but they jolted me back to reality. As much as I have the same concerns, in my heart I know that staying the course is the smart thing to do. If we pull out we will miss the wonderful opportunity to buy our funds on sale and watch our investments grow when the market rebounds. This sounds good in theory, but there are days I wonder when and if the market is going to get better. But historically, the market has rebounded and I am about 25 years from retirement so it would be foolish for us to withdraw our money and/or stop our contributions.
What I need to do is get my head out of the sand and look at our accounts. I have been avoiding my statements lately. Honestly it has been awhile since I really analyzed my retirement portfolio. Are our current funds in line with our retirement dates, goals and our current risk tolerance? Do I need to rebalance; what is our current mix? Am I paying too much in fees? Yes, maybe it is time to get my head out of the sand and accept reality. I'll never get this time back and in 25 years I don't want to regret not taking the time to spend on something so important.
We are not leaving the market; we will be staying the course.
Thursday, February 12, 2009
Subscribe to:
Post Comments (Atom)
Just saw over at GRS that you were moving your accounts under your advisor over to Vanguard, did you have a plan for what funds you will pick once your accounts move? I'm sad to hear that you weren't happy with your advisor, but you may very well be happier at Vanguard, so I wish you the best. I'm a financial planner myself, so if you have some questions I may be able to help out a little. Your post here on retirement planning shows a very common psychological dilemma that investors face during large market dips. Like a lot of people who take the effort to educate themselves, you know that staying invested in the market is your best course of action. Of course, this is easier said than done, especially when the markets and your investments keep falling month after month as it has this last year. What will help you get through this is something you need to have in place well before things get this bad: a long-term, written investment plan. This will allow you to envision your savings plan from start to finish, anticipating that you will have periods both good and bad, particularly over a long time frame. Even if you wouldn't necessarily change your actions today if you had such a plan, you would have more confidence moving forward which can be invaluable in itself. Very few people have the discipline to take a hard look at their portfolios in the *good* years and ask themselves if they should maybe take some money "off the table" and reallocate to a more stable mix, or at least stay true to their original allocations. This leads to panicky decision making in *bad* years, when you wish you could go back in time. My apologies for rambling a bit, but if any of this resonates with you, let me know if I can help. Cheers!
ReplyDeleteHi Aaron. We are not leaving the market, just moving from actively managed funds to index funds. About a year ago, before the market dive, I decided that I wanted to take over our retirement planning when I did some digging and realized how much we were paying in fees and commissions. I might not feel as bad paying the 5.25% upfront fee if I felt my fp was really paying attention to our accounts. I know in the end it is our responsibility to manage our retirement savings and I am taking a leap of faith in myself. We diligently contribute to our simple iras and I just set up accounts with an index fund company. I haven't transferred our actively managed fund accounts yet, but I will in the next few months.
ReplyDeleteThanks for your interest and comments.
I'm glad to see that you are taking such an active role in managing your assets. When done properly, I feel that index investing can be a great way to diversify, manage risk, and provide needed growth. It's by far the best way to reduce the fees inherent to investing, which will always add to your bottom line! As much as it pains me to hear that the professional that you were paying for advice wasn't taking care of you, it's a very positive step for you to realize that you aren't getting what you paid for and to take action on it. Just remember to stay diversified and keep contributing to those retirement accounts. Best of luck to you and your family, and keep up the good work on the site!
ReplyDelete