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Why Does It Seem Like My 401k Isn’t Growing?

This seems to be one of the most common questions I have asked to me on a regular basis. It’s certainly a fair question and one that’s probably gone through my head a few times.Why 401k not growing

Now that we live in more of an “instant gratification – what have you done for me lately world” we expect to see results immediately. While there are times you’ll actually notice faster growth within your investments because of a specific sector or company, for the most part it’s basically like watching a tree grow.

It’s not really exciting to invest for your future and it’s even harder to see what the future might look like in 20–30 years. We all live in the here and now and want to see those instant results. With that said, let’s take a look at a few of the reasons why it never seems like your 401k is going anywhere.

You’re starting at zero

If you’re just starting out, then you literally are starting at zero. And, unless you’re putting the maximum contribution of $18,000 a year into it, it’s going to take a while for the snowball to build.

However, you’re not alone. Everyone had to start at zero at some point. Warren Buffett started at zero. Bill Gates started at zero. Mark Zuckerberg started at zero.

Literally, every successful individual who has accumulated wealth started from zero. The hardest part is just getting started and then actually being able to see what your 401k will look like 20, 30, 40 years down the road.

It takes time

Following up from where we left off, it just takes time to see progress – 20, 30, or even 40 years. If you’ve invested your 401k in a good balance of stocks and bonds, you’re not going to see immediate results.

8% a year is a return that just about anyone would be pleased with over a 20 year period. However, when you have $50,000 in your 401k, 8% growth doesn’t seem like a whole lot.

Thus comes the power of compound growth. Compound growth in the first ten or even twenty years doesn’t amount to much. These are the years where you have to put your head down and just keep contributing.

You truly don’t start to see the beauty of compound growth until a good 20 years of saving. Then you’ll finally start to see things start to blossom. Check out the chart below from Get Rich Slowly.

From investing $5,000 a year with an 8% return, it takes nearly 25 years to get to $500,000. That’s a long time! However, it takes less than 10 years at that point to get $1,000,000 and then only about another 4 years to get to $1,500,000.

Compound growth

It is a slow ride, no doubt. But it’s a ride you don’t want to miss out on even if it’s driving you a little crazy that you don’t think your 401k is growing fast enough.

Have patience

Warren BuffettWhen you’re not seeing the growth you think you should be seeing with your 401k, you think you need to do something different. Well don’t! As long as you’re invested in a good balance of quality funds in your 401k, then don’t do anything stupid like putting it all in cash or your company stock. Stick with the plan and have some patience.

I know we all want everything right here and right now. But, it truly doesn’t work that way when it comes to investing. The best investors in the world are extremely patient. As Warren Buffett says, “The stock market is a device for transferring money from the impatient to the patient.”

You must have patience. Investing takes time. To be honest, it’s not really exciting most of the time. As much as Hollywood or CNBC try to hype it up, it's really pretty boring if you're doing it the right way.

Stick to your plan

Even if you don’t think you’re making progress fast enough, don’t stop contributing! Stick to the plan. You’re still going to need money to retire on someday, so I’m not really sure why your plan would change.

Your plan hasn’t changed, rather it’s more likely outside influences that have caused you to question your plan. If your goals haven’t changed then there’s no reason why your investments or the amount you’re contributing needs to change either.

Your goals should dictate how you invest, not CNBC or business colleagues. Have a plan and follow through with it. Distractions will come. Assess them as necessary, but don’t veer off course.

Everything I’ve written can be applied to any investment account, not just your 401k. Also, everything I’ve mentioned here isn’t easy. If it were, we'd all be great investors. However, we're human beings and we want to see things move much faster.

Anytime it seems your 401k isn’t growing or you want to go down a different course, come back and read this. I guarantee that your future self will thank you.

This is a post from Clint Haynes, a Certified Financial Planner® in Lee’s Summit, MO. He is also founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.


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About the Author

Aurtho Clint Haynes, CFPThis article was written by Clint Haynes, CFP®. Clint is a Certified Financial Planner® and Founder of NextGen Wealth. You can learn more about Clint by reading his full bio here.

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