If you’re freaking out about your retirement account right now, you’re definitely not alone.
The stock market took a dive this week after the Federal Reserve announced an interest-rate hike for 2019, and it left many investors looking through their fingers at their dwindling account balances.
In fact, this could be the worst December for stocks since 1931 if things don’t shape up — and soon.
“I’m not even looking at my 401(k) statements for the next six months,” one digital strategist tweeted.
“Dear Santa, I would like a blindfold to help read my 2018 401(k) statement,” a news anchor from Atlanta said.
Generally, financial advisers suggest staying the course — that is, not looking at your measly 401(k) balance at all, which could tempt you to pull your investments out prematurely.
But now’s also a good time to ask basic questions about your investments, according to the financial planning and investment firm BlackRock.
Are you saving enough?
Ideally, by age 30 you should have saved the equivalent of one year’s salary, according to the Boston-based investment firm Fidelity Investments — a guideline that has become controversial because many young people say it’s unrealistic.
The reality might look more like this: A typical American family, headed by a 30-something, has only $1,000 in retirement savings, according to the left-leaning Economic Policy Institute.
Another rule of thumb: You should have enough saved that you can withdraw 4% of your portfolio value every year in retirement without a serious risk of running out of money.
How will you get there? Try increase your savings rate when you get a raise at work, BlackRock wrote. Are you saving 5% now, but you could save 6% next year? Now’s a good time to adjust that.
Are your investments age-appropriate?
Take a look at target-date funds, which determine for you how much of your portfolio should be in stocks, versus cash and bonds, BlackRock wrote.
Erik Davidson, the chief investment officer for Wells Fargo Bank, previously told MarketWatch he recommends subtracting one’s age from 100 to determine how much of one’s portfolio should be in less risky assets, such as cash and bonds. At age 25, investors should have about 25% of their investments in those less-risky options and the rest in stocks. At 50, the proportion should be closer to half and half.
If your allocations look drastically different from that, make a change, BlackRock wrote.
How much of your own company stock do you own?
It’s risky to own tons of your own company stock — or any single stock, BlackRock wrote.
Even if you’re lucky enough to get some stock in your company, don’t overdo it.
“If company stock is a large part of your retirement plan, take a look at where you stand and you may want to consider rebalancing into a more diversified investment.”
