A Decision Not Made Is Still a Decision

Believe it or not, procrastination on investment choices is quite common these days. Whether it’s due to continued inactivity, an unwillingness to think about it, or trepidation, people who put off important investment decisions should probably consider the now rather famous advice offered by motivational speaker Brian Tracy, “Almost any decision is better than no decision at all.”

Not taking action on investments plays out in many ways in people’s financial lives. It is often silent and many times largely invisible until something brings it to the forefront, and it can have drastic consequences to people’s financial security well into the future.

Here are some of the areas we see this happen in commonly.

Your 401(k) Plan

One of the absolute worst financial decisions anyone can make is the failure to enroll in a 401k plan. Thankfully these days, more and more employees automatically enroll workers into retirement and 401k plans. However when people forgo a 401k enrollment, they sacrifice one of the easiest and best ways to earn for retirement. They also forfeit potential large employer matching contributions that could easily grow or double their money quickly. As you can probably see, not participating in a 401k plan has the potential to be one of the most costly indecisions one can make.1

Another way many people let inaction and/or indecisiveness harm them financially is not taking the initiative to select specific investments to place their financial contributions into in their 401k plan. When an investor does not make an investment vehicle selection in their 401k plan, there may be provisions for automatically investing that money, but not always. It is also important to understand that an automatic investment selection may well not be consistent with the individual’s investment timeframe, level of risk, and ultimate financial goals.

In most cases, investors must start taking their required minimum distributions from 401k accounts or other investment contribution plans when they reach the age of 72. Withdrawals from a 401k or similar contribution plans are taxed as ordinary income in most cases. It is also important to know that if withdrawals are taken before the age of 59½, these withdrawals may be subject to a distasteful 10 percent federal income tax penalty.

Non-Retirement Plan Investments

For most people and especially homeowners, stuff seems to accumulate over time to the point that one day people can’t figure out how they amassed so much of it. This is especially true when people are preparing to move. In a way, the same concept can be true for investors. Sometimes people buy investments due to reading articles or perhaps from information or a recommendation of a friend or family member. Others may still have investment money contained in a previous employer’s 401k fund.

The point is, over time, many people end up with investments that seem to serve no logical purpose as they no longer have any connection to current, needed investment objectives. Due to ever changing markets, timeframes, and dynamics, an investment that may have made perfect sense in the past may no longer be ideal.

When people do not periodically review what is in their portfolio, usually with the help of a financial advisor, they tend to lose out on time and money. Reviewing investments at least once a year allows the investor to dump inappropriate assets and switch to different options that make sense now. This should be looked at regularly to determine if the portfolio reflects the investor’s current financial and related objectives. Everyone should understand it’s important to make the decision to know what’s in their portfolio. This serves to weed out investments that may be inappropriate and replace them with current ideal vehicles.

Whatever situation you may find yourself in currently, your retirement investments really should be given careful attention. With the right financial help, you should easily benefit from the proper decision-making, and it doesn’t need to hard or inconvenient. Remember, your future self and family will be grateful you took a bit of time today to create a better tomorrow.

1. CNBC.com, December 28, 2021