YOUR RETIREMENT

PLAN, SAVE & MAKE YOUR MONEY LAST

Home > Your Retirement > Build a Nest Egg > Feature

DEL.ICIO.US

DIGG THIS

EDITOR'S PICKS: TOP 3

FEATURED SLIDE SHOW

10 Values in Vacation Homes

See 10 property values between $200,000-$350,000 that grabbed our attention.

Top 5: YOUR RETIREMENT TOOLS

TODAY'S MOST E-MAILED STORIES

PLUS: See Our Slide Shows

KIPLINGER'S MONEY POLL

Americans have cut their driving by more than 40 billion miles over the past seven months. Have you curtailed your driving?

RETIREMENT

Protect Your 401(k) in Turbulent Times

Don't be tempted to stop saving or cash out your retirement accounts. Take these four steps instead.

By Cameron Huddleston, Contributing Editor, Kiplinger.com

January 27, 2008

For many American workers, just thinking about the damage done to their retirement accounts since the beginning of 2008 can be painful. Worries of a U.S. recession have sent worldwide markets into a tailspin, dragging hundreds of billions of dollars invested in retirement plans along for the ride.

So what can you do to stem the flow of any more money out of your 401(k), 403(b) or 457 plan?

RELATED LINKS
	Shock-Resistant Investments
	Five Great Funds for 2008
	Keeping Calm

Let's start with what you shouldn't do: DON'T stop contributing to your retirement plan or cash it out entirely.

Sure, 300-point Dow plunges in a single day and relentless talk of a recession are scary. But, remember, you're in this for the long run -- even people in their 50s, 60s and 70s shouldn't worry too much. You won't need all your savings immediately, and because retirement can be a 30-year prospect these days, your investments have time to rebound.

"Just because things are happening (with the stock market) doesn't mean you have to take action," says Clare Bergquist, director of 401(k) strategies at Charles Schwab. "The action you need to take is: Take a deep breath and assess your plan."

Here's what you should do:

Study your history. "Remember, markets go up and markets go down, but history has proven that over the long term, they go up," Bergquist says. Over the past 20 years, the Dow has had some tumbles far worse than the 8% it's fallen this year: a 23% drop in October 1987 when the stock market crashed; a whopping 47% plunge during the 2000-02 bear market; and a 684-point plummet the day the stock market reopened after the September 11 terrorist attacks.

After each of those drops, though, stocks rebounded, and markets reached new highs. Taking the really long view, large-company stocks have returned an annualized 10.4% since 1926, according to Ibbotson Associates, an investment-research firm.

Plus, for long-term investors, a market downturn can be a good thing. "At the point where it's most scary, it seems the most bleak and you're the most depressed, that's the point when there's the least risk and the biggest gains are to be had," says Brent Brodeski, managing director of Savant Capital Management, a fee-only financial planning firm in Rockford, Ill. You can buy more stocks -- or mutual funds -- at cheaper prices, then reap the rewards as the market recovers.

Study your investment plan. Your retirement account is for buying and holding investments, not for day-trading stocks. But now might be a good time to review your plan based on your personal situation and risk tolerance, Bergquist says.

CONTINUED

1 | 2 NEXT >

READER COMMENTS

Post a comment

Hide comment form

Read all comments (9)

Read recent comments

POSTED BY: Linda Mesnard (January 28, 2008 11:06 PM)
...I've had three brokers "taking care" of my 40lK's over the years and three times I have lost a significant amount of money. For the last 5 years, I have decided to take care of my porfolio on my own. Not only have I made enormous amounts of money, I recently have pulled out of the market and am waiting for a more predicitable time to start trading again. My advice to all readers. Take your financial matters into your own hands. No one will look after your money the way you will. Good Luck.

POSTED BY: Alex (January 29, 2008 07:49 AM)
Cash out and buy gold and silver. Or push for a self managed borkerage account so you can own bear funds, sector funds, commodity funds etc. Many 401 plans offer very undiversified choices. They'll all crash and burn together. Inflation and a declining dollar are going to ravage. Professional advisors can't predict what will happen next week, let alone 10, 20 or 30 years from now.

POSTED BY: D... (January 30, 2008 02:44 PM)
...I have a court date coming up and I think I will represent myself - no one will look out for my best interest better than I would. Hopefully I will have self-diagnosed that mysterious ailment by then so I can prescribe myself the most appropriate medicine. No one cares more about my health than I do. I could go on...

POSTED BY: Joe (January 31, 2008 02:57 PM)
...go ahead and pay 5% of your returns to an "expert" who will handle your money. I'm going to invest in index funds and pay a whopping .2% to .5%, and I will beat most actively managed funds.

POSTED BY: Maurice (February 07, 2008 05:00 PM)
There is only one sure way of protecting your retirement from the uncertainty of the stock market. Investing in an Index Universal Life plan. It's way better than a 401 (K) plan because your money is safe, you can't lose it and you're guaranteed decent returns when the market appreciates. I think it's a bad idea to put so much money in 401(K) It's inflexible and there are too many penalties along the way...

POSTED BY: Shane (February 08, 2008 03:49 PM)
...most managed funds (the bulk of 401k funds available) UNDER-PERFORM the market. Joe is exactly right, the fund managers take 1-5% right off the top. It's IMPOSSIBLE to beat the market over the long haul by 5% a year to make up for these fees. Joe isn't talking about picking individual stocks, he's talking about just buying into these index funds...You'd be very smart to move most or all of your 401k money away from managed funds and into index funds if your plan offers them. And if it doesn't, you should suggest to your HR dept that they consider the option.

POSTED BY: james m. (April 26, 2008 10:36 PM)
I have been retired for about 3 years and at present don't need any of my 401k to get by. When or should I do anything with my 401k? Thanks any input will be greatly appreciated.

POSTED BY: Henry (May 29, 2008 11:14 AM)
James M. The IRS requires you to take money at 70 1/2 years old.

POSTED BY: audrey (June 01, 2008 08:33 PM)
James M--Every situation is different. You should not take random advice...

MORE: Kiplinger.com | Your Retirement | Build a Nest Egg

TOOLS:

E-Mail Article |

Print Article |