The best time to plant a tree was 20 years ago. The second best time is today.”

When was the last time that you actually looked at your 401(k) statement? Perhaps you are still in the post 2008 financial markets meltdown mode of “If I don’t look at it I can’t get upset”. Well, with the recent market volatility you might feel like it’s “deja vu all over again”.

First quarter statements will be in the mail next week and the results may not be pretty. Still, that shouldn’t keep you from checking your statement and discussing your goals with a financial advisor or financial coach. Your financial goals may not have changed however, how you get there may.

It’s just another reason to make sure that you keep an eye on your 401(k). Here are 5 other reasons to open that statement and keep an eye on things.

1. It’s probably your biggest retirement asset. If you have a 401(k) consider yourself one of the lucky ones. 25% of Americans who can invest in their company’s 401(k) don’t. One third of American workers have no retirement savings at all. Even if your 401(k) balance is in line with most Baby Boomers who have saved an average of $70,000, that still represents a big chunk of change any way you look at it. Next to the equity in your home it’s probably the biggest asset you have. All the more reason to pay attention to it and make sure it is working for you even if you never add another dollar (which I hope you will, especially if your company provides a match).
2. Asset allocation still works. After the great meltdown of 2008 the so-called market moguls were/are ready to write of the benefits of Modern Portfolio Theory. Why? Because there were some nuances of the 2008 crisis that couldn’t be accounted for in Modern Portfolio Theory like… corruption in the financial system! It still makes sense not to put all of your eggs in one basket or asset class. Diversification still makes sense and it still works. This recent market volatility will prove that point if you are properly allocated. Read more here.
3. Social Security is only one leg of three legs you need. One third of retirees end up relying entirely on Social Security. That doesn’t have to be you. Social Security will be there for you but you will also need your retirement accounts like an IRA  and your 401(k) as well as any taxable savings you have. If you are one of the fortunate few who have a pension as well as a 401(k) then you have a four-legged retirement savings stool. Congratulations. Otherwise it’s a three-legged plan. That’s OK. Take advantage of tax deferral. It’s like a miracle.
4. You may not want to work the rest of your life. Even if you think you will work until you drop either by choice or by necessity keep this in mind…half of current retirees surveyed say they left the work force unexpectedly as a result of health problems, disability, or getting laid off. If you think you’ll just “work forever” instead of planning for retirement, you may want to think again. (Source: Employee Benefit Research Institute)
5. Tax deferral is a gift you can’t afford to pass up. I remember Bank Day when I was in elementary school. The local bank would give each of us an envelope to put our deposit in and then a representative would come by each week and take it to the bank and then bring back the envelope with our “bank book” inside. I remember being excited to see the “interest” on my money in my little blue “Bank Book”. I wasn’t taking anything out of it so it kept on growing. Tax deferral works the same way. Uncle Sam can’t tax the money in your 401(k) and IRA accounts until you start taking money out of them. Hopefully that will be after you are 59 ½ and in a lower tax bracket than you are now.

   In the meantime the growth in your accounts keep on “truckin'”. Say you invest $1,000 and earn a return of 7%–or $70–in one year. You now have $1,070 in your account. In year two, that $1,070 earns another 7%, and this time the amount earned is $74.90, bringing the total value of your account to $1,144.90. It’s the gift that keeps on giving. Your money grows through compounding and tax deferral. Find out more about tax deferral and compounding here.

So open up that 401(k) statement and face the music whether it’s good or bad. In either case you can still take action to revive this important retirement vehicle. Become informed about asset allocation and tax deferral and then talk to your plan sponsor or financial advisor about advice on the mutual funds in your plan. Remember, it’s never too late to plant that retirement savings “tree”.

Question: What keeps you up at night when it comes to retirement savings? Leave your comments here.