Why Checking Your 401(k) Too Often Can Jeopardize Your Savings
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briefing for Thursday, July 7th. I'm J.R. Whelan for The Wall Street Journal. During the past six months of market upheaval, how often have you checked your 401k balance? Probably more often than you should. Watching your savings trend lower might make your stomach turn, but financial experts say constantly peeking at your balance could be even worse.
There's pretty long-standing behavioral research that shows that the more often you look at your 401k, the more often you look at the balance, the lower your long-term returns are likely to be.
Our retirement reporter Anne Turgerson has been looking into research on how investors can control that urge to log in and check their balances. She'll tell us how often financial experts say retirement savers should check their numbers, regardless of the mood on Wall Street. That's after the break.
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It's easier than ever to check your stock portfolio or 401k balance, but in a volatile year on Wall Street like we've seen in 2022, that doesn't necessarily mean that you should. Research from behavioral economists shows that checking your 401k balance too frequently can jeopardize your long-term investing goals. WSJ retirement reporter Anne Turgason has written about this, and she joins us to discuss. Hey, Anne, thanks for being here. Thanks very much.
Why do researchers warn that checking your 401(k) too often can harm long‑term returns?
So first off, Anne, let's be honest. As much as we're told not to obsess over market moves on a day-to-day basis, it's pretty easy to access data on the market and our own portfolios.
Yeah. I mean, we all are carrying around our mobile phones and it's very easy to check. 401k record keepers have noticed an increase in people checking via mobile. And the people who check via mobile actually check more often than people who check via computer or the old fashioned way, which is just to call the 401k plan, call the call center or, you know, wait for the paper statements to arrive in the mail.
But during any period of market declines, not just this year, we're often told to look beyond the chaos and invest for the long term. What do researchers find in terms of market volatility causing people to move away from that advice? And how does it affect how people invest?
There's pretty longstanding behavioral research that shows that the more often you look at your 401k, the more often you look at the balance, the lower your long-term returns are likely to be. And this has to do with the volatility in the markets, you know, just the normal volatility So with volatility, you know, you do see gains and you see losses. But for most people, on average, the pain of a loss is a more prominent feeling than the pleasure you get from a gain. So people tend to be more risk averse or loss averse in general. If you check every day, you're going to see markets post declines on average 46 percent of the time. Whereas if you forego the temptation to check every day and you check, say, once a year on an annual basis, you're only going to see the markets down about 25 percent of the time.
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