Motley Fool Hidden Gems Investing
Maximizing Your 401(k), and Is Retirement Bad for Your Brain?
09 May 2026
Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
Making the most of your 401k and does retirement make your brain decay? That and more on this Saturday personal finance edition of the Motley Fool Hidden Gems Investing Podcast. I'm Robert Brokamp, and this week I lay out 11 steps to making sure you're maximizing the value of your work-based retirement plan. But first up, some headlines that caught my eye this past week.
The S&P 500 is up 6.4% so far this year, while the S&P 600 index of small caps is up 15.7%, and the FTSE Global All Cap XUS index of international stocks is up 10.6%. I came across a couple of articles this week on both of these asset classes that I thought were worth highlighting. The first was published on wealthmanagement.com and comes from Larry Swedrow.
He points out that the so-called small cap premium, and that's the amount that small companies have historically outperformed large companies, seems to have disappeared in recent years, and many have questioned whether it actually ever existed. Larry cites a study from the Bridgeway Capital Management Group, which argues that the problem isn't the premium itself, but how we define small cap.
Their key insight, two groups are dragging down returns and obscuring a premium that is actually robust and persistent. The first group were labeled Fallen Angels, which are former large caps that recently crashed in value. If you take out the stocks that became Fallen Angels over the trailing three years, the returns of small caps improve by 1.57% annually since 1960.
And the other group is new market entrants like IPOs, SPACs, spin-offs, which tend to underperform, often by 2% to nearly 6% per year. Moving on to international stocks, a recent article from Morningstar's Christine Benz pointed out that after years of underperformance, non-U.S. stocks surged in 2025, returning 32% for the year compared to 18% for U.S. stocks.
This marked a dramatic reversal from the prior stretch, so when you go from 2009 to 2024, nine U.S.
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Chapter 2: What are the key strategies for maximizing your 401(k)?
stocks returned about 7.6% compared to 14.5% for domestic equities. But beyond better recent returns, international stocks also began to decouple from the U.S. market, which enhances their value as diversifiers. The Morningstar developed markets ex-U.S. index had a 0.92 correlation with U.S. stocks over the three-year period ending in 2022, but that figure dropped to 0.71 by the end of 2025.
For those who slept through statistics class, Remember that a correlation of one means that two investments move in lockstep, so a lower number means less correlation and potentially more diversification. Emerging markets have generally exhibited even lower correlations with U.S.
Chapter 3: How have the S&P 500 and small caps performed recently?
equities, partly because their dominant sectors, such as energy and basic materials, differ from the tech-heavy U.S. market, and because countries like China follow a different economic cycle. And on a sort of kind of related note, I thought I'd mention a recent chart from Paul Kudronsky, which highlighted that no other country invests in the stock market like Americans. 55% of U.S.
households have exposure to the stock market. The next three countries with the highest levels of stock ownership are Canada at 49%, Australia at 37%, and the U.K. at 33%. We Americans invest in the stock market mostly so we can retire, but retirement might not be so good for us.
This brings us to our next item, which is a study from the University of California, Irvine, entitled, Does Employment Slow Cognitive Decline? And the answer is yes.
The study included approximately 40,000 older adults from 1996 to 2018 and found that, quote, correlational evidence suggests that leaving the workforce before retirement age could accelerate the pace of cognitive decline, end of quote, and that, quote, employment near retirement age appears to reduce the risk of cognitive decline significantly which can in turn forestall the onset of dementia."
The effects are particularly concentrated among men ages 51 to 64. And this is just a recent example of many studies which have found that retirement may not be so healthy for people physically, mentally, psychologically, or socially. That said, there are plenty of happy, healthy retirees. I know many.
The ones who seem to do the best, according to the Mass Mutual Retirement Happiness Study, are more likely to fill their free time with multiple kinds of activities, including spending time with loved ones, exercising, pursuing hobbies, and travel. Also, make sure you're doing things to keep your brain sharp. Now let's move on to the number of the week, which is 100.2%. That's the U.S.
government's debt-to-GDP ratio, according to data recently released by the Bureau of Economic Analysis, which noted that the debt held by the public on March 31st was $31.27 trillion, while GDP over the last year was $31.22 trillion. We Americans now spend more on the interest to service our debt than we do on defense or Medicare.
According to a statement from the committee for a responsible budget, quote, the national debt is now larger than the U.S. economy, about twice the historic average. We've heard plenty of alarm bells in the past few years about our fiscal path, but this one rings especially loudly. The real question is whether or not our leaders in Washington will listen. With
Debt now above 100% of GDP, it's only a matter of time until we pass the all-time record of 106% reached in the immediate aftermath of World War II. This time, the borrowing isn't born from a seismic global conflict, but rather a total bipartisan abdication of making hard choices. End of quote. Next up, what choices you should make with your 401k when Motley Fool Hidden Gems Investing continues.
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