The Stock Market Plunge and Your 401(k)

Written By Guest Post
Last updated March 11, 2020

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Investing
March 10, 2020

Simple. Thrifty. Living.

The stock market took a severe hit Monday. The Dow Jones industrial average fell 2,000 points. In fact, the market hasn’t experienced a drop of this magnitude since 2008. No wonder investors are panicking. So what should you do with that 401(k)? Well, it all depends on where you are on the course to retirement.

Contrary to popular belief, it’s not just the coronavirus. A well established oil deal between Russia and Saudi Arabia fell through this past weekend. Sending global markets into a tailspin. This paired with the coronavirus and expected toll it will have on the economy created the perfect storm. No can predict what will happen next, but as the virus spreads and oil prices drop, there will be ripple effects felt around the world.

If you are looking at the long-term game, stay the course. Its inevitable when investing for 30 plus years to see major swings in the market. If you aren’t in the midst of retirement you have time for you investment to rebound.

The Young Investor

If you are young, you have the gift of time. When markets drop significantly, the likelihood of them rebounding is incredibly high. Some investors are using extra cash to buy during this dip.

If you are nearing retirement age or just retired yourself, it’s hard not to worry about the recent market events. However it’s important to keep in mind that most retirees will need 3 decades of savings, so thinking about your long-term investments is crucial. It is also important to make sure you have a diverse investing approach.

If  you are well into retirement, this type of drop can have major consequences. Take for example the 2008/2009 crash. Retirees on average lost 25% of investments. However, experts are warning that this drop is very different from the crash of 2008. Even if you are in retirement, it is best to hold tight, and not look at your 401(k) on a daily basis.

Experts warn not to make any changes solely based on short-term market swings. The best thing to do is reassess your current retirement plan and portfolio. Making sure you have the right mix bonds, stocks, and any other assets. Additionally, making sure your investments are more conservative as you near retirement.

Coronavirus

Given the worry over the coronavirus outbreak, there may be a number of ups and downs in the market for a while. However, the market could stabilize if the outbreak slows.

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