A decision not made is still a decision
Whether through inertia or trepidation, investors who put off important investment decisions might consider the admonition offered by motivational speaker Brian Tracy, “Almost any decision is better than no decision at all.”
This investment inaction is played out in many ways, often silently, invisibly, and with potential consequences to an individual’s future financial security.
Let’s review some of the forms this takes.
Your 401(k) Plan
One of the worst decisions may be the failure to enroll, although more and more companies are automatically enrolling workers into their retirement plans. Not only do nonparticipants sacrifice one of the best ways to save for their eventual retirement, but they also forfeit the money that any employer matching contributions represent. Not participating holds the potential to be one of the most costly indecisions one can make.
The other way individuals let indecision get the best of them is by not selecting the investments for the contributions they make to the 401(k) plan. When a participant fails to make an investment selection, the plan may have provisions for automatically investing that money. And that investment selection may not be consistent with the individual’s time horizon, risk tolerance and goals.
In most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 73. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10 percent federal income tax penalty.
Non-retirement plan investments
For homeowners, “stuff” just seems to accumulate over time. The same may be true for investors. Some buy investments based on articles they have read or based on the recommendations of a family member. Others may have investments held in a previous employer’s 401(k) plan.
Over time, we can end up with a collection of investments that may have no connection to our investment objectives. Because of the dynamics of the markets, an investment that may have once made good sense at one time may no longer be advantageous today.
By not periodically reviewing what we own, which would allow us to cull inappropriate investments — or even determine if the portfolio reflects our current investment objectives — we are making a default decision to own investments that may be inappropriate.
Whatever your situation, your retirement investments require careful attention and may benefit from deliberate, thoughtful decision-making. Your retired self will be grateful that you invested the time today.
Richard H Mootz, CFP® CERTIFIED FINANCIAL PLANNER™ professional, is a registered representative of and offers securities through Securities America, Inc., a registered broker/ dealer, member FINRA/ SIPC., advisory services offered through Securities America Advisors,
Inc., A SEC Registered Investment Advisory firm. Mootz Financial Solutions and Securities America Companies are not affiliated. Mootz can be reached at 530877-7007; by email rick@mootzfinancial. com or at www. mootzfinancialsolutions. com. Securities America and its advisers do not provide tax or legal advice. Please consult with your tax or legal professional regarding your individual situation. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.