401(K), Retirement, and How a bit of “Laissez Faire” is not all that Bad

Confession time. Have you ever given thoughtful consideration to your 401(K)?

Now don’t be shy to shake your head, because that’s not exactly a bad thing. If you’re the over-reactive sort who gets scared each time investment prices drop, you might be hurting yourself in the long run by always going out at a loss.

In fact, we have these people to thank for keeping the amount of pooled funds healthy.

Of course, you do have to spend a bit of time to make sure your investment is suited to you. If you’re in your 20s, for example, you can focus on higher-risk options. On the other hand, a 60 year old nearing retirement should focus on preserving his/her income and should opt for low-risk options.

People who are generally too intimidated about the whole idea of choosing the right option can just go for target date funds. In this alternative, you can choose the date you’d like to withdraw your fund. Fund managers are then tasked to ensure that the growth of your retirement money is maximized at the earlier years, and then preserved when the withdrawal date is near.

The bottom line for those who are not knowledgeable in finance and investment is to strike a balance between a laissez faire approach to your 401(k) and an excessively involved approach. This is absolutely important as more and more Americans are relying solely on their 401(k) for their retirement money.

Source: CNBC Article via Yahoo Finance

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