The pandemic has created a tough time for the American economy, but it’s still a good time to bet on your future by continuing to work on your retirement account. It’s standard advice not to touch your 401(K), but that doesn’t mean to check on the health of the account.
“If you are looking at your 401k, one of the first things you’ve got to remember is unless you need the money next year — you really need to be thinking long term,” says James Royal, Bankrate investment and wealth management senior reporter.
It is a good time to look at whether you are being too conservative or too aggressive mainly because many Americans may not know the answer to that question.
“We are really talking about how much you have in stocks and how much you have in bonds, so stocks go up a lot but they fluctuate. Meanwhile, bonds are real steady eddy kinds of a few percent a year,” says Royal.
The key is finding a balance and that depends on your age. If you are closer to retirement age it could be safer to be more conservative, but if you are in your 20 and 30s having more in stocks can be a win. Advisors say you can deal with the ups and downs.
You can find the answer to these questions by asking whatever company is managing your accounts and request possible changes.
Remember that saving anything at all early will have a better chance to grow through compound interest. However, there are savings goals that would need to be hit if your goal is to have a fully funded retirement account.
It is also a bad idea to borrow from yourself by tapping your retirement accounts. Royal says it’s a good idea to have a solid emergency fund ready before you start making larger contributions to your retirement account.
Bankrate has a look at aggressive and conservative accounts here.
