Wednesday, October 8, 2008

How to Cure Obsessive-Compulsive 401(k) Checking

Author: Nick
Category: Money
Topics: , ,

comic 62 - retirement party

If you’re like me (you poor, depraved soul) then you’ve been checking your retirement accounts rather obsessively over the last few weeks thanks to headlines like “Dow Drops Below 10,000!” and “Is the Next Great Depression Right Around the Corner?” and “Lindsay Lohan Comes Out of the Closet.”

Some anecdotal evidence is suggesting that many people have lost 5-10% of the values of their retirement accounts in 2008. Others have been even less fortunate; some folks heavily invested in their own companies only to see them go under and take their nest eggs with them.

I’ve been moderately more fortunate than others as my own company’s stock is still in the vicinity of its all-time highs and is countering losses in the other parts of my 401(k). When I checked this morning, I confirmed that I’ve actually netted 13 big dollars on my investments this year. And that brings me to the point of today’s rant discussion: why am I obsessively checking my 401(k)? Is there something I think I can do about it by watching its value decline day by day? Perhaps my subconscious believes that by keeping a close eye on it, I can magically reverse its course.

Well, it’s time for me to come clean: today was the first day I’ve checked my 401(k) balance in over four months, and it’s at nearly the same value as it was four months ago. I realized early on that obsessively checking my 401(k)’s balance every day would only cause me needless worry. After all, I’m at least 35 years from the normal retirement age, and the balance of my 401(k) is relatively small enough that it’s hardly worth worrying about in the long run. If anything, I’ll only cause myself pointless stress checking it during this time of economic turmoil.

Unfortunately just about everyone I know has not been as successful in fending off the “401(k) OCD.” I frequently walk down the hallway at my work and see people logged on to our retirement account management website to check how their money is doing. And many of these are workers that are my age or younger! Even worse, there are those who have shifted most or all of their retirement funds to non-stock assets. If you wanted to sit on the sidelines while the market takes a nosedive, the time to do that was months ago! Now many of them will likely leave their 401(k)s parked in “safe” investments and will miss out on any rebound the market makes in the coming months and years.

Lucky for them and you, there are ways to fight 401(k) OCD. Talk to your doctor about prescription Cialis… oh, wait, that’s for an entirely different problem. Here are some ways you can keep yourself from obsessing over your retirement accounts that have worked for me:

  1. Lock yourself out of your accounts. Call the company which maintains your retirement accounts and change your access passwords. When they ask what you’d like to change them to, say “I don’t care. Pick something and don’t tell me.” Just make sure you have a way to unlock your account a few years down the road.
  2. Stop watching financial news. Call your cable provider and cancel CNN, MSNBC, and everything else that isn’t Cartoon Network and Playboy.
  3. Dump your company’s stock. If you still wanna stick in the stock market at this point, make sure your retirement accounts are diversified. Having 90% of your retirement wealth tied to the success or failure of your company is not diversified—it’s stupified.
  4. Make smarter investments. Perhaps when you first set up your 401(k), your friends told you which investments you should pursue. If your retirement account is down 30% this year, you may want to switch your investments around a bit to include a nicer variety of investments like commodities and foreign stocks. And also find new friends.
  5. Temporarily stop contributing to your accounts. This move probably only makes sense if you’re in the 50+ crowd. If you’re contributing $300 to your 401(k) each week, and your 401(k) in turn loses $3,000 a week, you may want to temporarily halt your contributions and stick your money into conventional savings. But if you’re young and/or your employer matches your contributions, you’ll need to do the math to see if contributing still makes sense.
  6. Mind your debts and cash savings. You’ll feel a lot better about your plummeting retirement account balance if your debt is also plummeting rapidly. Paying off debt quicker is one of the safest investments you can make because you’ll know exactly how much money you’re saving as you do it.
  7. Address the real financial issues in your life. Perhaps your obsessive 401(k) watching is merely a symptom of a much bigger personal fiscal problem. If you’re worried about your retirement funds drying up while you’re buying Mercedes and vacationing in Tahiti, then your priorities may be a little mixed up.

Follow those steps to relieve your retirement account stress and your 401(k) OCD should be cured in no time. And now that you have an extra 5 or 10 minutes a day that you aren’t watching your retirement funds crumble, you can put that time to good use by fortifying your house and stocking up on supplies for the coming Even Greater Depression.

Hmm, saying that probably didn’t do anything to ease anybody’s anxiety. Sorry!

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