First Person: My 401(k) Beat the Record High Without Me

Yahoo Contributor Network

My 401(k) balance surpassed the $84,300 record recently recorded by Fidelity Investments. However, it had nothing to do with me or my investment knowledge. I took a hands-off approach like a growing number of 401(k) savers. According to a recent CNNMoney article, the average balance went up 11 percent from $75,900 a year ago based on an analysis of 12.6 million Fidelity accounts. I'd like to give myself the credit. However, the only thing I did right was leave my money invested in the stock market so my retirement money could recover from reaching a low point of about $35,000 during the recession. Even though I'm psyched about the recent gains, I'm skeptical that my retirement account will grow in the next decade unless in health insurance costs come down and my income goes up.

Depending on the stock market

It's scary to have to depend on the stock market in order to compensate for everything from inflation to unexpected taxes and new expenses. Experts say the S&P has gained for than 15 percent in the past year, which has boosted 401(k) results. I stayed invested in mutual funds that focused on large and small companies.

Picking target-date funds

In the past, I avoided target-date funds. Now I view them as a way to diversify my retirement savings. I give myself the freedom to invest in individual stocks within my Roth IRA. My 401(k) only offers a small selection of mutual funds and target-date funds. It's nice to have some investments that I don't have to think about or touch. I chose a target retirement date of 2040 because I don't plan to take money out of my 401(k) until I'm at least 70. According to Fidelity, fewer people are taking the do-it-yourself approach to investing with one-third choosing target-date funds compared to 3 percent a decade ago.

Opting for the Roth 401(k)

When I first opened a 401(k), the company I worked for didn't offer anything other than the regular 401(k). I am now able to save a percentage in the regular and a percentage in a Roth 401(k) if I want. I decided to only contribute to a Roth 401(k) so that I don't have to pay taxes when I'm older and need the money.

It's interesting to me that one half of Fidelity's 401(k) savers between 22 and 34 have chosen target-date funds. When I was in my 20s, I had disastrous results by investing on my own during the dot.com bubble. In my 30s, I relied on mutual funds as well as target-date funds within my 401(k). I had 10 times better results by contributing to my 401(k) as opposed to investing in stocks on my own. If I had pulled my money out of my 401(k) during the Great Recession, I would not have surpassed the record high today. I am skeptical that the stock market will continue to rise. I just have to put my fears aside and step aside because my investments grow best without my "help."

More from this contributor:

Investing after a 401(k) Wipeout

Tapping Retirement Funds for College

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