LAST REVIEWED Apr 21 2021 4 MIN READ
By The Human Interest Team
401(k)s are a long-term investment, not a short-term play. That said, it’s hard not to look at the impact of recent market volatility on your account balance and wonder if you’re making the right decision.
How Human Interest helps
Our commitment is to help give people tools to help them save for retirement, but how are Human Interest customers weathering the market volatility of the last several weeks: Are they making changes in their account settings in reaction to COVID-19 or staying the course with their focus on their future?
Here’s what our data team found:
The vast majority of customers, roughly 9 in 10, are maintaining their level of 401(k) contributions. Of those who have changed their contribution level, people were three times more likely to decrease rather than increase their contribution level.
More than 90% of Human Interest customers are staying the course and not adjusting their risk settings in response to recent market declines. That means they’re sticking with their long-term plan, and a portfolio design aimed to help them get there. Among customers who did adjust their risk settings, there are roughly similar numbers who are increasing and decreasing their risk setting: just over half decreased risk settings, while just under half increased them.
Why is this important?
Changing risk settings to be more conservative when the market is down increases the chance that you could lock in your losses. While keeping money in the market after going through a loss may feel like a scarier choice, doing so will give your account balance the chance to regain the losses back when the market recovers.
Remember that when it comes to saving for retirement, the most powerful tool you have in your arsenal is time.
Spending more time in the market is much more important — and much more feasible — than timing the market.
How does Human Interest help?
Our platform is designed with customers’ long-term interests in mind, and a big part of that is our risk setting feature, which uses a questionnaire to better understand our customers, including their risk tolerance, their current financial situation, and more, and set a portfolio designed to help each customer reach their long-term goals.
How is this different from a target-date fund?
Our investment advice takes into account not only your age, but also your risk tolerance, income, and so on. So you get all the advantages of a target-date fund (including the automatic rebalancing) but it’s more personalized than only considering your age. After all, many people end up retiring earlier than planned. Before you buy: Read more about what to consider about TDFs.
Are you a 401(k) plan administrator looking for information that you can share with your employees?
Check out our resource page for 401(k) plan participants.
The Human Interest Team
We believe that everyone deserves access to a secure financial future, which is why we make it easy to provide a 401(k) to your employees. Human Interest offers a low-cost 401(k) with automated administration, built-in investment advising, and integration with leading payroll providers.