401(k) Advice, My Ruined Vacation (Thank You Delta) & Why You Should Care
I had been looking forward to President’s Day weekend for the last couple of months. It’s a long weekend for Smart401k, and my friends and I had decided to meet up in Park City, UT. Park City is an awesome mountain to board on and the town has great food and drink. Needless to say, I was excited to get there when I headed to the airport on Friday.
Unfortunately for me, Delta switched to a smaller plane. They couldn’t get enough people to volunteer to skip the flight, so some of us lost our place on the plane. This occurred even though I booked the ticket well in advance, had a confirmed seat and got to the airport in plenty of time. In other words, I did everything “right” but, somehow, instead of boarding with my friends for the weekend, I had to cancel my vacation (Delta couldn’t get me out of KC until Sunday which defeated the purpose of going).
You’re likely wondering how in the world my experience could possibly relate to your retirement planning … Well, here goes (and please let me know what you think by commenting):
1) You can’t control everything, no matter what you do –I learned the hard way that occasionally things happen that are outside of your control. Similarly, many investors thought they were doing everything they could to prepare for retirement. Then the market collapsed and many investors found out that losses can happen even if they were doing things “right” (more on this later).
2) Although it’d be easy to say that I’m never going to fly on Delta again, it’s probably not realistic. Similarly, many investors who saw large losses in their accounts probably thought about abandoning the market. Emotional decisions like these often end up hurting the decision maker rather than helping. Avoiding Delta all together might make me feel better for a while, but it could also cost me money and make my flights longer… neither of which would make me happy. Many investors hated to see their accounts drop, but saving for retirement in a diversified portfolio is still the most appropriate strategy for almost all of us.
3) There is always more that you can do – Even though I thought I had done everything right, I realized after the fact there was more that I could have done. I learned that I lost my spot on the new (smaller) plane because I was one of the last 12 to check in. As a result, I’ll be checking in as soon as I possibly can which is generally 24 hrs before your flight. Similarly, many investors thought they were doing things right simply by investing in their 401(k). However, many investors did little beyond randomly selecting their investments without understanding what these investments were and how they would affect their long-term goals.
Saving for retirement is an ongoing process requiring you to be engaged in the process. You not only have to think about what types of investments are appropriate for you, but also how much you should be saving. Unfortunately, there is no such thing as a set-it and forget it investment strategy that magically gets you to retirement.
So what should you do? Generally, the more you save the greater likelihood there is that you meet your retirement goals. If you combine an appropriate amount of saving (aim for 10-15% of your income) with a diversified strategy you increase your chances even more. And, if you don’t have the time to figure everything out, I highly suggest hiring an unbiased adviser to help with your retirement investment strategy.
So, while this experience lowered my confidence in Delta and made me want to do something that would make me feel better (in the short-term), I’m glad I took the time to reflect on the long-term effect of my actions. If you’ve had similar thoughts about bailing on saving for retirement I encourage you to take a deep breath before making any emotional decisions that could have a long-term effect on your financial health.
If you’ve had an experience that made you want to make a short-term “feel good” decision let us know what you decided and what you’ve learned since making the decision.
Scott H
PS – Sometimes making long-term decisions is tough. I’m in the process of rebooking my vacation for March and unfortunately the price of the ticket has more than doubled (my ticket for last weekend cost $240 while the ticket for my trip in March is now $521). OUCH! Thanks again Delta!
