About 30% of people with a 401k or IRA say they don’t rebalance or reallocate their retirement plan on a regular basis, according to a new survey from GOBankingRates.
Over one-third of respondents ages 25-54 said they have never rebalanced or reallocated their retirement accounts—which GOBankingRates notes is particularly concerning because people undergo many life changes during this long period of their lives, from buying their first home to having children and watching them go off to college—which means their financial goals and risk tolerance may shift considerably as well.
Even worse, 29% of respondents ages 55-64, on the cusp of retirement, said they never rebalance or reallocate their investments.
The survey of 803 respondents, conducted in November, asked about their retirement account balances, how often they check and rebalance those accounts, and their confidence levels toward their chosen investing approach.
While 42% who have a 401k or IRA said they look up the balance every month, 14% said they never check their retirement account balance and roughly one-third of overall survey respondents said they didn’t know their retirement account balance. Of note, 37% of respondents ages 65 and older were in the dark about their savings.
As financial situations and savings goals change, it makes sense to reevaluate and adjust a retirement plan regularly, but the survey found many people just leave it on autopilot indefinitely.
Average contributions nowhere near max
On average, the survey found Americans contribute $1,999 per year to their 401k or IRA. This of course is just a small fraction of the $19,000 contribution limit maximum for 401ks in 2019 (going up in 2020) for workers under 50 or the $25,000 max for those 50 and over.
Interestingly, people who said they tend to “set and forget” their retirement plan end up contributing $1,131 more, for an average annual total of $3,130. Roughly half of these individuals check the balance in their retirement accounts once a year or less.
Despite their regular contributions, 12% of overall survey respondents said they’re not sure how their 401k or IRA is performing. About 6% think they need professional help to grow their retirement savings and wish they had more help with choosing their initial investments.
The survey also found that women contribute far less to their 401k or IRA than men do—in fact, they’re saving roughly half as much. Women contribute an average of $1,331 annually, whereas men add $2,633 per year, on average, to their retirement accounts.
However, the survey also found women were more likely to have a professional who rebalances or reallocates their retirement plan. About 22% of women compared to 16% of men have gotten professional help with their retirement investments.
About 15% have less than $1,000 saved
The habit of not rebalancing or reallocating a retirement plan can reflect in the account balance over time.
Americans who set and forget their 401k or IRA were just as likely as overall survey respondents to have saved less than $1,000 for retirement—even though they contribute significantly more. About 15% of both groups revealed that they have minimal retirement savings.
Michael Foguth, president and founder of Brighton, Mich.-based Foguth Financial Group, told GoBankingRates that people who “set and forget” the automatic savings to their retirement accounts, specifically 401ks and IRAs, commonly make the mistake of not adjusting their dollar amount per paycheck when they receive pay increases.
“As you move up with an organization, your pay will likely increase. This in turn should increase contributions to your retirement accounts,” Foguth said. “For example, when you hired in, $100 per paycheck may have been what you could afford at the time, but 10 years later, you should not still be contributing $100 per paycheck.”
At the same time, overall survey respondents were less likely than people who “set and forget” their retirement plan to have $100,000 or more saved—at 20% and 26%, respectively—so this strategy can seemingly go both ways. About 30% of overall respondents had no clue how much they have saved in their 401k or IRA.
People who “set and forget” their retirement savings were more likely than overall respondents to have a traditional 401k—at 65% and 53%, respectively—which GOBankingRates said might indicate that these Americans are sticking to their default employer-sponsored retirement plan.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
