Planning to Retire

How Low Can Your 401(k) Go?

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October 15, 2008 RSS Feed Print
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Adam of FL 4:10PM May 19, 2011

Why would so many people take money out of their 401(k)? There is only one word - FEAR.

Warren Buffett likes to say that to be a successful investor, don't follow the crowd. "Be fearful when others are greedy, and greedy when others are fearful."

http://www.brainyquote.com/quotes/authors/w/warren_buffett.html

For those who have at least 5 or more years to their retirement, they need to stay invested, speak with a professional advisor to check their diversification and risk tolerance, and think LONG TERM.

The four worst years in the S&P 500 since 1930 are

2008, 1937, 1974, and 2002. Here is something interesting you may not know - returns (also S&P) from the years following these "down" years.

1938 +31.1%

1975 +37.2%

2003 +28.7%

2009 ??

So if an investor had "sold out" in one of these years, they would have missed a lot of gain. What does 2009 hold? We don't know, but as Warren Buffett also says, "If you wait for the robins, spring will be over."

Read more about 401(k) Bargains at http://401kcoach.myblogsite.com/ You can also visit my website at www.helpmy401k.us.

Dean Voelker of IN 5:01PM April 30, 2009

Slovell55, I would need more details about your financial situation before I could give you advice.

How close are you to your target retirement age?

Having said that, I can still impart some words of wisdom. If your 401k is keeping you worried constantly, keeping you from sleeping, then you need to get out.

But before you do, do your homework. Do the math. How much money do you lose if you liquidate?

Of course no one knows what the stock market will do exactly, but all are in good agreement that the trend is down. If you are young and have decent cash, maybe it's worth it to ride it out. But be prepared to see -60% losses 2-3 quarters from now. If you can stomach it and the math makes sense, stick with it. If not, pick up the phone.

Ed of TX 12:03AM October 23, 2008

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