I didn’t write the following list, but my thirty-years managing 401k plans substantiates what is said below … sadly 😰.
Human nature being what it is, people tend to do exactly the opposite of the correct strategy based on their misunderstanding of retirement planning and their perception of risk.
Participants have a long list of misperceptions regarding their company’s 401(k) plan. The most frequent I hear include:
🤑 You should stop making contributions when the stock market falls.
🤑 It is a good idea to take a loan from the plan.
🤑 I only need to contribute enough to receive the maximum company match.
🤑 Money market funds are a good place to invest.
🤑You should sell when the market falls to avoid losing everything.
🤑 Allocating more of my balance to funds that are performing the best is a good investment strategy. I don’t want to miss something.
The fact is: stock market drops are usually buying opportunities 🤨 taking a loan is a very bad idea 🤨 you need to contribute as much as possible and certainly enough to meet your retirement goals 🤨 money market funds are to be avoided because their return is minimal and inconsistent with long-term investing 🤨 selling when the market falls is a fools move and exactly what caused people to “lose their retirement savings” in 2009 🤨 your fund allocation should reflect your retirement plan 🤨 your risk tolerance and your age and time before retirement.