Is your 401k losing money?
After reading a few articles about people talking about their diminishing 401(k)s, I decided to check and see just how well mine has been holding up against the crisis. I haven’t checked it in months, because I am in it for the long haul and I know that over the last 100 years we have had about 25 recessions and 25 recoveries. I know, some of the talking heads are saying that this time it is different, but from the few I have lived through, they seem to say that every time. John brought up a good point that we should be taking advice from Warren Buffett (who has been buying lately since things are so cheap) because he obviously has been successful, rather than people being guided by fear.
What to do when your 401k loses a lot of money
Anyway, back to my 401k. It is down. A lot. 37% this year to be exact, and just like you I have the strong temptation to pull it out and hold on to what is left of it, BUT I am not going to. Historically, when things have gotten really bad, a couple months or years later they come back in full force.
No one really knows for sure what is going to happen, but I think that even statistically speaking, the chances are good that we as an economy are going to come out of this recession/depression just like the others.
What if I want to retire soon?
Hopefully, if you have had your retirement funds invested wisely, you shouldn’t have too much invested in stocks as you near retirement. I know bonds haven’t been doing very well either, but they haven’t been draining 401ks the way stocks have lately.
If I were planning on retiring in a couple of years and had lost as much money as I have in my 401k, I would probably plan on working a bit longer, or figure out a way to live off a little bit less. I would just hate to pull my money out on the downturn of the market.
As my wife and I have been working on getting out of debt, we have learned a lot about living off of less. If I knew I had to retire in two years and would be stuck with a lot less in my 401k that I hoped, I would…
- Focus my time and energy on paying off debt. Credit cards, car loans, any other loans, and then the mortgage. Knocking out each one of these debts just reduces the amount you need to survive. This of course is why being debt-free is so fun – you can pay your bills each month with a minimum wage salary.
- Pray about whether or not to move your funds to cash. I truly believe that the market is going to come back, but I have no idea how far (if any) it will have recovered in a couple years.
- Consider a second job to pay off debt to minimize your expenses. There are tons of freelance jobs you can do from home.
What I am doing with my 37% loss in my 401k
I am trusting the advice and methods of a few wise investors by sticking it out. I am fighting the urge to bail out. I don’t know for sure what will happen, but I am using my best judgement and doing that.
But the bottom line is regardless of what happens to our money in the bank, our 401k, or the economy we still have the promise that God is going to take care of us…
“For this reason I say to you, do not be worried about your life, as to what you will eat or what you will drink; nor for your body, as to what you will put on. Is not life more than food, and the body more than clothing? “Look at the birds of the air, that they do not sow, nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not worth much more than they? “And who of you by being worried can add a single hour to his life?