My 401(k) is tanking. What do I do?

The markets have taken some pretty wild swings lately. But is now the right time to revisit your 401(k) investments? I’ll tell you in this week’s Money Minute:

There’s nothing wrong wanting to check things out. If you’re nervous about your investments, ask your plan administrator to take a look under the hood. Jeanne Thompson, VP of investments for Fidelity, says 401(k) investors should work with a financial advisor at least once a year to rebalance their holdings anyway. “There are advantages to making changes both when the market is high or low,” Thompson says. “A lot of times people pick the beginning of the year to call [and rebalance] but there isn’t one particular time of year that’s best.”  The point of rebalancing is to make sure you’re taking on the right amount of risk given your age and retirement goals. Just don’t forget about your emotional tolerance as well. If you’re waking up in a cold sweat in the middle of the night every time the markets get shaky, maybe it’s not wise to put 90% of your 401(k) in stock funds. “You want to be able to sleep at night,” says Thompson.

Younger workers probably have less to worry about. If you’re decades away from retirement, don't be surprised if your advisor tells you to hang tight. Younger workers are advised to take on more risk early because they have a longer time to recover from any market setbacks—and more time to reap the rewards when markets bounce back. Given the way most young workers are investing these days, they may have even less to worry about. According to Fidelity, nearly two-thirds of millennial 401(k) investors are 100% invested in target-date funds, a type of fund that picks your holdings based on your age. Target-date funds are meant to be left alone. They automatically shift away from stock-heavy investments to the safety of bonds as you age.

Just remember -- you’re probably better in the market than out of it. Sometimes the best time to get in the market is when things are looking bleak -- read: cheap. Just ask the folks who pulled their money out of the market back in 2008. Fidelity, one of the largest investment firms in the U.S., found that people who stayed in the market saw their accounts grow by 88% five years after the recession. People who turned to cash saw their balances grow by just 15%.

What’s important is thateven when you’re watching the value of your holdings fluctuateyou keep contributing to your account. Retirement plans are meant to be long-term investment vehicles, and making moves based on short-term volatility has proven a bad idea many times over.


The bottom line: You can’t time the market. What you can do is work with a financial advisor to come up with a retirement plan you don’t have to worry about every time the market gets shaky.

More money questions? Shoot us an email at

Mandi Woodruff is a reporter for Yahoo Finance and host of Brown Ambition, a new podcast about career and finance.

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