I’m going to keep this post short because this is something I genuinely worry about happening to my friends and family.
One of the biggest investing mistakes people make is contributing money to a Roth IRA or Traditional IRA… and then never actually investing it.
The money gets deposited into the account, but instead of being invested into something like index funds or ETFs, it just sits there in cash earning very little interest. This is especially common with Traditional and Roth IRAs.
If you intentionally want to keep your money in cash, that’s completely fine. But many people don’t realize this can happen by accident - sometimes for years. And over decades, that mistake can cost tens or even hundreds of thousands of dollars in missed growth.
I’ve read horror
stories on Reddit from people who discovered they had been “investing” for years when in reality their money had just been sitting uninvested in a settlement fund. With how strong the market has performed over the past 10–15 years, that missed opportunity can be painful to look back on.
How to Check if This Is Happening to You
First, don’t panic.
This situation most commonly happens with self-directed investment accounts - meaning accounts where you are responsible for choosing the investments. If you work with a financial advisor who actively manages your accounts for you, this is much less likely to be an issue. This is also less common with workplace accounts (like a 401k) because they often have a default investment fund.
To check, log into your account and look at what your money is actually invested in. If you see investments like mutual funds, ETFs, index funds, or stocks, you’re probably fine. But if most of the account is sitting in something labeled:
- Cash
- Settlement Fund
- Money Market
- Core Position
- Cash Reserves
…then your money may not actually be invested in the market.
A lot of people assume that once money is transferred into an IRA, it automatically gets invested. In many self-directed accounts, that’s not how it works - moving money into the account and investing the money are two separate steps.
And if you discover this has been happening to you, don’t get discouraged. The important thing is catching it now and making intentional decisions moving forward.
As always if you have questions our suggestions, send me a note! I'd love to hear what's on your mind: