401(k) Losing Money? Here’s why you shouldn’t panic

It was a tough week for stock investors as volatility rocked the market. If you’ve taken a look at your 401(k) plan balance, you may be seeing numbers that are lower than you’d like. And that can be nerve-wracking.

But while it’s certainly troubling to see your 401(k) plan lose value, it’s important not to panic or make rash decisions. Here’s why.

It’s all about long-term growth

The purpose of saving money in a 401(k) is to amass a retirement nest egg. Now, if you’re just a few years away from retirement, you’ll need to be careful not to invest too much in the stocks in your portfolio. But if retirement is decades away, then a blow like many investors experience shouldn’t shake you too much.

Image source: Getty Images.

The stock market is known to be volatile and it is known to go through periods where the value of investments declines to varying degrees. And while it’s no fun going through a downturn, it’s important to remember that if you’re saving for a big milestone like retirement in 10, 20, or 30 years, a brief dip in stock market values ​​is not something to get you working. about. In the long run, this will most likely end up being completely meaningless.

That’s why you shouldn’t let the recent volatility cause you to throw away your stock investments. If you play your 401(k) too carefully, you risk limiting the growth of your savings over time, resulting in a shortfall in retirement. Instead, stay the course, especially if you’re years away from leaving the workforce.

Make sure your investments are age-appropriate

While the recent volatility certainly shouldn’t cause you to ditch the stock market, it can serve as a wake-up call to make sure your retirement portfolio is age-appropriate. If you’re not quite ready to retire, but are getting close, take a look at your assets and see how they’re distributed. If you’re heavily loaded with equities, it might be time to start moving into bonds.

In the meantime, if you’re planning to retire in the next two years, you’ll definitely want to shift at least 40% of your assets from stocks to bonds. It’s important to approach retirement with a balanced portfolio because if you start with too many stocks, you could end up locking in losses if the market crashes early.

It’s also important to make sure you have enough cash – at least for a year – if retirement is very close. If not, you might want to track your investments and liquidate some of them for cash at the right time.

Stay focused on the big picture

Stock market downturns can be shocking, even when they are relatively short-lived. But remember, saving for retirement is a marathon, not a sprint, so try to keep temporary setbacks in perspective. And certainly don’t rush to rethink your stock investments if you’re not ready to retire for many, many years. Stocks have a long history of rewarding investors who stick with them, and there’s no reason to think you won’t have a similar experience.

Comments are closed.