Comments on: Help! My 401(k) is Losing Money!

By: Dan

Dan — Wed, 13 Oct 2010 01:28:39 +0000

Paula,

Since the crash, the market has somewhat rebounded, so your 401k should have partially recovered. Did you cash out your 401k right after the market tanked?

Also, what’s your 401k allocation? The closer you get to retirement, the more you should move away from stocks and into safer investments like bonds and short-term securities.

By: Paula Knight

Paula Knight — Tue, 12 Oct 2010 18:36:19 +0000

I retired 5 years ago and was living on my retirement funds up until the stock market problems and now 1/2 of my retirement funds are lost. I no longer contribute to the fund and now almost all of the money is gone. What do I do now? I worked all my single life and saved what I could and now it’s gone. All I have is social security and no income. What now?

By: Ryan

Ryan — Fri, 06 Mar 2009 17:08:03 +0000

Lily: Glad to hear you didn’t liquidate everything. I think you might have regretted that later on. Paying off your debt was a good use for the money though, and will give you more cash flow to use how you see fit. You might consider using that same money to pay off other debt, or increase your retirement savings to make up for the money you withdrew.

Final note: Placing your money in a money market account may make you feel better because you won’t see any more major losses in your funds, but you are locking in the losses that have already happened.

Even though my retirement accounts have experienced large losses, I plan on keeping my money in those accounts so I don’t lock in those losses. I have many years until retirement, and I hope to make up for those losses when the markets turn northward. Best of luck!

By: Chad @ Sentient Money

Chad @ Sentient Money — Fri, 06 Mar 2009 16:53:23 +0000

@ Randy
I did much the same thing and have been slowly getting back in this year, which has caused me a little higher loss. I can see the market still getting hammered from here, but I can also see it hitting bottom sometime this summer early fall. Thus, I’m slowly putting it back in on drops, as the bottom isn’t as clear as the top was.

Anyway, I think the most important point to make, that you said better, is that everyone needs to be an ACTIVE investor. I’m not necessarily saying everyone needs to try market timing. I’m saying that everyone needs to take responsibility for their investment choices. No one cares more about your money than you do…not even the people you pay to care about your money.

By: Lily

Lily — Fri, 06 Mar 2009 16:14:39 +0000

Oh and i used my money from vanguard accounts to pay off my car loan. YAY!!! debt-free in this market is a bliss…just my thoughts

By: Lily

Lily — Fri, 06 Mar 2009 16:11:23 +0000

Thanks for your advice. Vangard accounds were too late but I still have my 401k at my current employer which I haven’t withdrawn yet. I will follow your advice to reallocate it to the money market funds. I think it’s a great idea that I wish I thought of it before withdrawing my vanguard rollover & roth IRAs.

By: Ryan

Ryan — Fri, 06 Mar 2009 15:00:58 +0000

Randy: It sounds like you did an excellent job with your 401k. Unfortunately, many people (including me) didn’t do that. Thankfully, I haven’t cashed out and have increased my contributions to purchase more at a discounted rate. I missed out on a good opportunity though and wish now that I would have done what you did!

Great tips, and thanks for sharing.

By: Randy

Randy — Thu, 05 Mar 2009 20:14:24 +0000

Chad makes some excellent points on watching your investments. I believe you should always be aware of your investments in your 401k plans and stay abreast of the state of the economy. During the slump in the early 2000′s of which I suffered major losses during the market correction by leaving everything alone, I chose to invest heavily in High risk funds to regain those losses rapidly with the thought I would now watch closely and be prepared to move into a safe haven. I did that last September reallocating 90% of my High risk assets into a Money Market Fund. Final damage to my 401k portfolio is a one year overall loss of 6.6% instead of 39.8% had I left it alone. In my case there was no method to determine this transfer of funds besides just watching the economy and a gut feeling. I am now poised to invest the 90% again when the market shows some stability but I do have my 401k contributions investing into the same High Risk funds I pulled out from only now at discounted rates. I had declined to pay for a 401k Management service offered through our company plan and am glad I did. Those that chose to use it were not protected in the least. It was not in the Funds best interest for individuals to reallocate and therefore did not happen. Can you imagine what would have happened if everyone had pulled out. Can’t say that myself and every other person I have spoken to haven’t thought about cashing out like Lily did and paying everything off but since penalties are placed as a deterrent to leave the money alone it does serve its purpose. The moral to all of this is to remember that it is your money and is in your best interest to keep an eye on it. Your portfolios will recover, it will just take time.