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Markets Timing

Practice Management

As it happens, I commemorated an anniversary of my birth this last weekend.

It’s not a particularly significant one — it doesn’t end in a 5 or a 0, won’t trigger any new savings opportunities or impact (catch-up, RMD trigger, forbearance of withdrawal penalties, or Social Security) — but it is a birthday, and therefore a day upon which to reflect (and to wonder anew why we don’t make more fuss about our mothers, who — let’s face it — did the real work on that day).

Traditionally, on my birthday weekend (and the 4th of July holiday), I have taken a look at my current asset allocations and, when circumstances warranted, rebalanced. There’s no magic to those points in time. It’s not the ONLY time I look (and act) — but it happens to be a time when, whatever is going on in the market, I have a calendar-driven opportunity to take a breath and take a longer view. And, let’s face it, this year has been a bumpy ride in the markets.

The mantra in times of volatile markets is, inevitably, “stay the course” — wise counsel in most situations, particularly since the impulse in such times is often action that one comes to regret in the fullness of time. However, for some, just sitting still and “taking” what the markets choose to inflict on your retirement savings can be excruciating. 

For me, anyway, this year will be a little different. Most significantly, as I near my “retirement” threshold, I’ll actually be shifting into a different pace of accumulation. And, for the first time in my working career, I will be doing it with my retirement savings accumulated into a single place (well, technically two — one for Roth, the other for the traditional pre-tax rollovers). That said, and my birthdate notwithstanding, I still have plenty of investment runway to ride. 

That said, and while my weekend should be a bit less structured than usual, here are some things I have traditionally done — that you, or those you support, may find useful — particularly with the current market uncertainties.     

Get started on rebalancing by changing the investment elections of NEW contributions, rather than transferring existing balances. It will take longer to realign the entire account, but at least you aren't realizing those as-yet-unrealized losses.

Increase current deferral rates. When you think about just how much cheaper those retirement plan investments are now, compared to a year ago, it's hard to pass up that kind of bargain. More so if you aren't yet saving at the maximum level of the match.

Consider automated rebalancing. Most providers now have in place mechanisms that will, on some preset frequency (monthly, quarterly, annually), automatically rebalance individual accounts in accordance with investment elections. It's a good way to keep things in balance without having to worry (or remember) about the best time to do so — calendared events notwithstanding.

Better yet, consider shifting to a target-date fund or managed account. You may well be wondering why I would go to the “trouble” of manually rebalancing my 401(k) when there are professionally managed solutions available like target-date funds and managed accounts. The reality is that only one of my previous 401(k)s had target-date funds available on their menu[1] — and I have taken advantage of that regular rebalancing by professionals to some advantage.

None of this has to wait for a birthday, of course. But doing so on a regular basis can be an effective way to ensure that you get that retirement wish when you blow out the candles!


[1] Another had a managed account option (that I didn’t care for).