It's hard to invest in the future when there's a need in the now.
"The way people allocated their funds to their 401(k)s were much more conservative," said
Though the Great Recession was the most recent of the country's volatile economic swings, the panic that stopped many from contributing to their 401(k)s was nothing new. In fact, it was quite human. The man who won the 2002 Nobel Peace Prize for Economics proved so.
Usually reserved to economists, the award that year went to noted Israeli-American psychologist
At its worst, the economic troubles of 2008 made the light at the end of the retirement tunnel seem muddled and more distant than ever.
From the bombastic TV fiscal advisor
"People go on the air and showcase extremes. They try to scare people," said Adams. "If they can scare people, they can make people do things. I used the info from behavioral finance to show people not to overreact."
"People who stayed the course, that didn't get sucked up in the panic, they got back," she said. "People that kept investing during the worst times were buying low and got back."
Now that the economy has recovered from its 2008 stupor, 401(k) advice remains the same: stay the course for as long as possible.
"I know people with their 401(k)s that don't watch, they have an automatic allocation fund and just close their eyes to the stock market," said Adams. "These people are in very good shape. They don't give themselves the chance to overreact."
From the crater left in the wake of the Great Recession emerged a different workforce, nothing like the one before it. According to Adams, people won't be working the same job for 35 years anymore. More people will have multiple jobs throughout their life, which means having more than one 401(k). So another question comes up: what should one do with the 401(k)s from old jobs?
- "People should roll those old ones into a retirement fund Roth IRA. It's in one place instead of being scattered in different areas," Adams said. "Most individuals that are of normal income, general finance advice is contribute to the 401(k) up to the match, then take a look into Roth IRA. After that, you can go back to the 401(k)."
In this post-Great Recession age, having a 401(k) plan and keeping to it is important, but nothing is more essential than time. Adams does some simple calculations. Investing a mere
"Your money can work for you 24/7, it can work while you sleep," she said. "If you give it enough time, your 401(k) will help you retire soundly."
(c)2014 Journal Star (Peoria, Ill.)
Visit the Journal Star (Peoria, Ill.) at www.PJStar.com
Distributed by MCT Information Services