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Have you checked to see what’s in your 401k?
I recently had a conversation with someone close to me about what was in their 401k. And by ‘401k’, I also want to include people in similar retirement plans (e.g. Roth IRA and 403b). So, just let ‘401k’ refer to retirement plans in general.
Anyways, the person had no idea what was in their 401k (in fact they seemed to not even understand how a retirement plan works, as if it grows through magic). Why could it be a problem to not know what’s in your 401k?
Because theoretically most of their money could be in bonds. And if you’re young, that’s not a good idea. Why? Because when you’re young you want to take on more risk and look for growth assets like stocks.
Imagine that all of the money invested in your 401k was in cash. That would mean that once you hit retirement, you would have no retirement. You would be broke. That’s because cash doesn’t grow, it shrinks….due to inflation.
This would mean it would make no sense to just check whether or not you have a retirement plan, nor would it make sense to make sure you merely start a retirement plan.
Discovering/inventing a retirement account is a necessary condition for retirement, but it’s nowhere close to being a sufficient condition. Still, I will happily grant that having a retirement plan is better than not having one at all.
But, a retirement plan with no plan on your part is 4chan — an unmitigated disaster. (1)
Notes
(1)DISCLAIMER: I am not a financial advisor, nor is this blog post intended as financial advice.
