When To Check on Your Retirement Funds (and When To Not Worry)

Although a well-designed retirement plan can be relatively self-sufficient, you should make it a habit to check on your investments periodically to ensure that everything is going according to plan. However, obsessively checking your retirement funds can lead to a host of problems, from causing undue stress to increasing the likelihood of making poor, emotionally charged decisions. So, how do you strike the balance between obsessing about your retirement funds and neglecting them? Here’s a look at why, when and how you should monitor your retirement funds.

When You Should Regularly Check Your Funds

Although appealing, the idea that you can “set and forget” any type of investment plan is outdated thinking. Changes occur at lightning speed in today’s financial markets, where news is disseminated instantaneously and machines can trade thousands of shares in a fraction of a second. In that type of environment, you’ll have to keep an eye on your portfolio. Here are the times when you should regularly check your funds.

When You Experience a Major Life Change

Any time that you undergo a major life change, it’s a good time to review your portfolio. This is because your investment objectives and/or risk tolerance may have changed. For example, when you get married, you now have to think of a spouse and potential children. Many newly married couples also want to buy a house. This can change the way you should be investing from when you were single and only had to worry about funding your own lifestyle. The same is true for other major life changes, from having a new baby to getting divorced to experiencing a death in the family.

On a Calendar Basis

The best way to keep emotion out of your investing is to automate your contributions and check your accounts on a calendar basis, rather than when the impulse moves you. By setting a schedule to check your accounts annually or quarterly, you’ll be reviewing your accounts methodically, rather than emotionally. A quarterly account check should be frequent enough so that you can drop any positions that no longer meet your needs or pick up new investments that are good opportunities.

As You Age

As you get older, you generally want to dial down the risk level of your investment portfolio. This doesn’t mean that you should sell all your stocks and buy Treasury bills, but it does mean that you might want to lighten up your more speculative positions. When you are young, you have time for the market to recover from any downdrafts, but a 20% selloff right when you retire could prove devastating to your long-term financial plan.

When There’s a Major Drop in the Market — But Don’t Overreact

When there’s a major drop in the stock market, it can be an excellent time to add to long-term positions. The caveat here is that investors can often get emotional when markets are down sharply, so you’ll want to be careful to act rationally and not based on your fears. You’ll particularly want to avoid selling any positions when markets are down if their long-term stories are still intact.

When You Should Leave Your Retirement Funds Alone

As shown above, monitoring your retirement funds is an essential part of a successful financial plan. But as with many things in life, too much of a good thing can ruin it. Here are the times you should resist the urge to check on your retirement funds, as the risk of making a poor financial decision increases.

When You’re Experiencing Trauma or Distress

Investing is often an emotional process. If you’re too excited about the market making new highs, you might dump in a lot of money right at the top. Conversely, if you’re too scared when the market sells off sharply, you might pull your money out right when it’s about to turn around. As emotion is the enemy of investing, making major financial decisions when you’re going through a period of trauma or distress is a terrible time to be taking a look at your portfolio.

If You Just Checked One Hour Ago

Checking your portfolio too often is a recipe for making too many changes. Not only might excess transactions result in additional fees or taxes, trading too often is generally a recipe for poor investment performance. If you find yourself checking your portfolio every hour or even every day, it may be time to take a step back.