In the past, I have highlighted some serious risks to investing success from topics as timeless and simple as avoiding unreasonable portfolio costs to more timely market risks like warning signs of future inflation. Today, I want to share some quick thoughts on a risk that most individual investors wrestle with everyday – financial procrastination. Similar to the “this is my last tasty (but unhealthy) meal…I’m starting tomorrow” diet, financial procrastination is when individuals put off all of the important things they need to do to be a successful investor. It’s when tomorrow turns to next week and then next week turns to next month. The next thing you know, it’s been a year since you meant to rebalance your portfolio or sell that individual security.
Take for example the so-called “orphan 401K” – it’s when an individual leaves a job and the retirement assets that they accumulated in their past employer’s 401K plan sits idly, unmanaged and neglected. Most people plan to roll these assets over to either an individual IRA or to their new employer’s 401K plan, but inevitably life gets in the way. It’s not just 401Ks either. Many individuals have opened up various investment accounts along the way and most sit unattended with no real plan in mind. Fortunately, it’s easy to fix these issues. All it takes is a little will power.
Continuing our example above, let’s assume someone sits down and rolls one or even all of their old 401Ks into an IRA. What are the benefits?
This is just one example and clearly there are potential benefits to be had. While some of these things may seem small, they can lead to huge improvements over time. Ultimately, while it’s important to consider all the factors at play before making any type of financial decision, I think the lesson here is to just not put it off. Consider all the factors, make a decision, and then execute.
Retirement may seem far away so it’s easy to push things off for things that seem more timely, but it’s more important than you realize. So consider this your call to action – take one or two of those things you’ve been meaning to do and push it to the top of your list today. Trust me, it’ll be worth it.
Until Next Time,
Chris Hugar, CFA