The Expert Podcast

Do you have a 401k fund? Are you ever wondering how you're doing? Is your balance good enough? Do other people have more money than you? Are you being successful with your investments? Well, here's a really good article that gives you some insight into how most people are doing with their 401ks, what has happened in the last year or two with balances, and it may point to kind of a comparison of what your success or results have been compared to others. This came out in Motley Fool where it says this is the average balance last quarter and also it talks about what has happened to balances in general. The headline is many savers saw their balances drop due to market turbulence. It wasn't because of people taking withdrawals. People aren't pulling money from their 401ks on average, but the market has dropped on the securities that most people hold in 401ks, which has made it lower.

How much are we talking about? Well, here's the actual number: the average 401k plan balance was $103,800, so roughly about a hundred grand. Well, a year ago it was 20% higher, meaning that it was probably about $120,000 to $130,000. So this is a big drop and the market has dropped a little bit, but the specific stocks that many people hold in 401ks have dropped even more than the market because of the psychology of 401ks, what you put your money into, that has been the norm. So there's your number: basically 100 grand. So if your fund has five figures in it, you're a little bit below the average. If you have in the hundreds or $200,000, you have above average.

A lot of it also depends on age. People who have been putting money in for longer may have more, but this is just the average of all ages. What else does it mean in terms of the losses? Well, if you're seeing a lower balance according to this article, you must realize that the balance you're looking at represents a single moment in time. It's not what you're going to have when you retire, it's not what you had a year ago. Stocks go up and down, and retirement is a marathon, not a sprint. So you are going to have the opportunity for it to grow, but you always want to look at what are the holdings that you keep, what are the contributions you make. If you think the market's going to go down in certain areas, do you want to reallocate? That's where a great financial manager and analyst or advisor will give you good advice, and you want to make your own decisions as well and consider input from multiple sources. You don't want to just take one person's opinion; you want to mix that in with your own investing goals.

This is where some people make a mistake playing it too safe. If you see volatility, you might shift money away from stocks and put it into something else. As an example, when the markets crashed in 2008 with the economic crisis, a lot of people dumped real estate, dumped stocks when the prices went down. Well, within a few years, all of the values of those things had gone up to where they were pre-crash. So if you sold it at that lower level, you missed out on that upside, right? And you had to buy it back when it was higher. Now, that's not a guarantee that prices will go up again, but for the most part, things generally tend to increase, especially when we're in an inflationary environment. When there's inflation, generally all things will go up in price: stocks, real estate, prices of things.

In fact, Walmart is reporting higher sales mostly because of inflation of the prices. Their sales volume is actually staying about the same, but the transaction strike price is going up because of inflation. Does that mean higher profits? Maybe, depending upon how you run your expenses. So 401k funds are not excluded from that. Certainly inflation can trigger recessions, which may affect value of securities and stock prices, but you want to make sure that you look at your long-term investment goals and what the history of economies have shown happens when there are rises and fall events in volatility.