Safeguard Your 401(k) in Down Times
Recently many Americans have found themselves cringing as they’ve watched the recession and market plunges wreak havoc with their retirement accounts. The damage may be unnerving, but the situation is not hopeless.
There are steps you can take to help stem the flow of any more money out of your retirement accounts.
- Stay the course. First and foremost, even if you’re close to retirement, don’t be tempted to stop contributing all together or to cash out your 401(k), 403(b) or 457 plan entirely. If you cash out and aren’t 59½, you’ll have to pay a 10 percent early-withdrawal penalty. Plus you’ll miss out on potential earnings generated via compounding as well as any employer matches your company offers.
- Understand the market’s history. In the past two decades, the markets have taken worse tumbles than what we’ve seen recently. Historically, after big drops in the market, stocks have rebounded and actually reached new highs. Remember past performance may not be indicative of future results.
- Consider the opportunity. Market downtown may even benefit long-term investors because they can buy more mutual funds or stocks at lower prices and reap the financial rewards once the market recovers.
- Examine your investment plan. The best plan during a tough market environment is a solid, long-term investment strategy. Use the recent market volatility as a wake-up call to review your plan based on your personal situation and risk tolerance. Be sure your portfolio is well-diversified and that you are properly allocated. Your financial advisor can help you assess what is best for your particular needs.
