I think we’ve all seen the criticisms of the $4 lattes or the expensive avocado toast. Millennials should really tone it down. Don’t get me wrong; if you’re piling up credit card debt and still living a life of luxury and leisure, you may want to get a grip on that. There’s also a place for being intentional about any spending that you’re doing, but the noise about the lattes and toast distracts from the larger decisions we need to pay attention to. More significant choices get caught in the noise that can cost you dearly in the long-term. Let’s meet Jackie.
Missing the Last Step
I met with my friend Jackie a few weeks ago, and she had done a great job of getting her finances set up. She had enrolled in her employer’s ESPP, her company’s 401(k), and even set up a Roth IRA. She also splurges on Pumpkin Spice Lattes as soon as they hit the stores. I’m not here to judge; that’s her jam.
While reviewing her investments, I saw that she wasn’t getting much growth out of one of her accounts. She had forgotten to do the last step, selecting where her funds should go in her 401(k). The thousands of dollars she directed to this account were sitting stagnant. She wasn’t losing money, but her money wasn’t growing either. Jackie was losing thousands with her current investment, not to mention the loss in compounding interest year over year.
I know Jackie isn’t the only one out there. She is actually further ahead of the game than most with her current contributions. Some people may not finish the process due to a lack of knowledge or the intimidation that comes with the final step of picking your investment vehicle for retirement.
The great thing about this process is it doesn’t need to be a high-effort endeavor. It might even be less effort than the fretting you do about whether to cook at home or go out to eat. That’s why I like Target Date Funds.
Conclusion
If you’re contributing to retirement accounts, when’s the last time you checked what funds (holdings) they’re in? I recommend logging into your investment accounts twice a year for maintenance and check-ups. Don’t sit on your retirement funds.
