Failing to Revisit Your Asset Allocation
The problem with a do-it-yourself defined-contribution plan like a 401k is that it’s ultimately up to you to manage the risk. That means you have to keep a vigilant eye on your allocation particularly if you’re nearing retirement.
If you’re in your 20s or 30s, you can take a 2008-caliber market meltdown in stride. You have decades to earn the money back. But if you are a couple years away from retirement, a major stock market decline could have a major impact on your ability to retire. Be sure you evaluate your asset allocation at least annually to make sure that you’re not overexposed to stocks, and you should ideally have a financial adviser give it a look as well.
Of course, the opposite is true if you’re young. If you’re underexposed to stocks, you might not get the growth you need to meet your retirement goal decades later.
Charles Sizemore is the principal of Sizemore Capital, a wealth management firm in Dallas, Texas.