Whether through inertia or trepidation, investors who put off important investment decisions might consider the admonition offered by motivational speaker Brian Tracy, “Almost any decision is better than no decision at all.”
This investment inaction is played out in many ways, often silently, invisibly, and with potential consequences to an individual’s future financial security.
Let’s review some of the forms this takes.
Your 401(k) Plan
One of the most costly decisions an investor can make is failing to enroll in a 401(k) plan. Not only does this limit the opportunity to save for retirement, but it may also mean missing out on valuable employer matching contributions.
The SECURE 2.0 Act has helped address this by requiring many employers to automatically enroll eligible employees in retirement plans beginning in 2025.¹ Still, participation alone isn’t enough.
Another common form of inaction is failing to select investments within the plan. When no election is made, contributions are typically directed into a default investment option. While these options are often designed to be broadly appropriate, they may not align with an individual’s specific time horizon, risk tolerance, or financial goals.
Additionally, failing to plan ahead can create challenges later. In most cases, required minimum distributions (RMDs) must begin at age 73. Withdrawals are taxed as ordinary income, and distributions taken before age 59½ may be subject to a 10% federal penalty.
Non-Retirement Plan Investments
Just as belongings accumulate over time, so can investment accounts.
Some investors buy assets based on articles they’ve read or suggestions from friends or family. Others may leave assets in former employer retirement plans or hold onto legacy positions long after their original purpose has passed.
Over time, this can lead to a fragmented portfolio and one that no longer reflects a cohesive strategy or current financial goals. Market changes can also shift the role and risk profile of individual investments.
By not periodically reviewing and adjusting a portfolio, investors are effectively making an ongoing decision to maintain a strategy that may no longer be appropriate.
Final Thoughts
Regardless of your situation, your investments deserve regular attention and thoughtful decision-making. Small, intentional actions today can have a meaningful impact on your future.
At SHJ Wealth Advisors, we’ve spent over 30 years helping clients build and maintain diversified portfolios aligned with their goals. If you’d like to review your current strategy or explore your options, we invite you to reach out at Info@shjwealthadvisors.com to schedule a time with one of our CFP® professionals.
Your future self will thank you for the decisions you make today.
Disclosures
1. Investopedia.com, January 6, 2023. The auto-enroll feature does not apply to companies with 10 or fewer employees. Also, new companies in business for less than three years are exempt from the rule.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.
