Unless You’re A Millennial, You Should Pay More Attention To Your 401K


Lots of millennials aren’t saving for retirement, but it may not be because they’re irresponsible—and the millennials who are saving may not be doing the best job at it. | Source: ShutterStock

For a long time, those of us with 401K accounts were told to “set it and forget it.” But now it may be time to forget that entire strategy. Good news? Millennials are already doing that.

A new survey from TIAA reports that 59 percent more millennial investors made changes to their 401K portfolios than investors 35 years or older, with only 42 percent who participated. Meanwhile, 34 percent of investors 55 or older report making no changes at all to how their funds are invested.

ReKeithen Miller, a certified financial planner with Palisades Hudson Financial Group in Atlanta, claims that the “set it and forget it” mentality can lead to financial “disaster.” Frankly, that sounds a little dramatic, and financial planners have a vested interest in having people move their money around, but we’ll hear the guy out.

Miller told CBS News that 401K investors should look at their books at least once a year to make sure everything is going according to plan, which makes sense. Miller explains that investors will gain benefits from “selling their best performing investments and buying those who have not performed as well recently” because of the ebb and flow of the market. He adds, “Revisiting the investments in your 401(k) will allow you to assess whether an investment option still makes sense. Perhaps you picked a fund because it was managed by a very successful manager. If that manager is no longer around, the fund may not make sense for you to invest in going forward especially if the new manager plans to follow a strategy that you are not comfortable with.”

Still, Robert Johnson, a finance professor from the Heider College of Business at Creighton University, says that if you’re young and really far from retirement anyway, you may as well “set it and forget it” because, well, you’re going to get exhausted moving all that stuff around for such a long time.

“If you are young and retirement is many years off, the optimal allocation for most individuals is either 100 percent stocks or the vast majority in stocks,” Johnson told CBS News. “One’s asset allocation should not change significantly from year to year. The fact that the majority of individuals haven’t changed how their money is invested in the past year is actually quite encouraging.”

Johnson added that millennials who are overactive in the market may actually be doing it wrong. “They have the benefit of having many years to go until retirement and can afford to assume the short-term volatility of the stock market. Unfortunately, many people get the idea that ‘investing’ is about actively buying and selling. Building wealth is about developing a plan and sticking to it, ignoring all of the ‘noise’ coming from many of the financial news networks.”

You hear that, millennials? Here’s an excuse for us to be lazy. Show your parents.

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