25 Jul 2024 Own Goals Are Easy To Score

If you have ever seen six-year olds playing soccer, then you will have seen the inevitable instance of one kid (and therefore a whole pack of kids) who forgot or possibly never knew which goal they were supposed to be scoring on. 

But even at the highest levels of professional soccer it’s frightfully easy to score an own goal, and except in the rare instance of match fixing, no one ever intends to score one. They just happen. Still, we should do our best not to be involved in them if at all possible.

On Monday of this week there was an article about a particular form of a financial own goal in the Wall Street Journal, and it included this graph, which made me physically ill.

Yes, if you combine all those lines together, what it means is that nearly a third of all people who rolled 401(k) balances into a Vanguard IRA in 2015—a process which necessarily involves liquidating investments and transferring cash—were still sitting in cash in those IRAs seven years later. I doubt if any of the thousands of people who make up that third meant to do it, sat there on their couch and resolved to leave their tax deferred savings in cash for…ever. But it happened! Because own goals get scored. They do. In fact, here are a few more:

• Creating a beneficiary mess by simply forgetting to update them.
• Loaning money to a bank at a steep discount (I.e., earning 1.5% on your savings account when you could easily get 4+%)
• Not taking advantage of employee benefits like 401(k) match, ESPP, etc.
• Acting on financial advice from strangers on CNBC

Thankfully, the antidote to financial own goals is just like soccer: Teamwork and communication! Money is a team sport, and having others involved who communicate well and proactively, who can see things on the field that you can’t–this is the key to avoiding own goals. Personal responsibility is always important, but it can only get you so far in a complicated game with many players. 

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