What Are You Doing About Your 401(k) In This Struggling Economy?

by Broke Grad on October 24, 2008

I was talking to one of my friends/coworkers about the economy the other day, and we got onto the topic of our 401(k)s. He asked if I had checked my 401(k) lately, and like most of us who are invested in the stock market, the answer was yes.

Then he proceeded to ask if I had changed my 401(k) contribution because of the struggling economy, and this is where our philosophies clashed. Our reactions to the falling stock market have been in equal, but opposite directions.

My friend reduced his 401(k) contribution to 5%. I like to call this a rookie mistake. He’s discouraged because his investments have been going down instead of up, so it feels like he’s throwing away his money. It seems like it would make sense to the lower the contribution until the economy gets better, but what he doesn’t realize is that he’s passing up a good deal on stocks while they’re at lower prices. At least he’s not completely stopping his contribution.

I increased my 401(k) contribution to 10%. With my retirement over 30 years away, I can safely assume that the market will recover and continue to grow by then. By increasing my contribution while the market is down, I’m getting more shares for my money. While I may be losing more money than my friend right now, I’ll gain more in the long run after the market turns around. I won’t be using this money until retirement anyway, so I don’t need to worry about what’s happening to it right now.

What adjustments have you made to your 401(k) in this struggling economy?

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1 twenties money October 24, 2008 at 5:39 am

Left mine alone. I’ve been continuing to pump 12% into it despite the fact that my ytd return is -46%

2 Green Panda October 24, 2008 at 5:40 am

We haven’t allowed the struggling economy to stall or top our retirement contributions.

3 budgets are sexy October 24, 2008 at 5:11 pm

keeping it exactly the same – 19% per paycheck till that bad boy is maxed out! i’d totally pump up the % even more if i could swing it right now…..everything is like 50% off! haha…

4 Rhea October 25, 2008 at 6:16 am

I haven’t touched my 401K. I know I am picking up shares at a lower price. I am sitting tight and not changing much of anything. I am, however, increasing my savings. I keep it in a simple account that draws a bit of interest. Nothing fancy. I just want it there in a few years when the turmoil dies down.

5 Kathy October 25, 2008 at 12:57 pm

I increased my 401k to 13%, but am putting all new money into TBills – not loosing, but not making anything. II increased my 401k to 13%, but am putting all new money into TBills – not loosing, but not making anything. I will move it into specific funds at a later date. I left all the rest of the 401k funds where they are – lose or gain. The only thing I worry about are future tax increases when I am old enough to pull from my 401k. I’m in the long haul. Hopefully I live long enough to use it! will move it into specific funds at a later date. I left all the rest of the 401k funds where they are – lose or gain. The only thing I worry about are future tax increases when I am old enough to pull from my 401k. I’m in the long haul. Hopefully I live long enough to use it!

6 GradGirl November 1, 2008 at 4:54 pm

I swear, call me a rookie, but no matter how many times I read/hear advice like this, I still am gun-shy. I just can’t bring myself to put more into the stock market yet (my Roth IRA is already maxed and I don’t have the option at work for a 401K, so that’s irrelevant). I know I’ve heard advisors say you should listen to your gut, so that’s comforting—at some point, I will know it’s the right thing to do for me. Not yet.

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