Should I Still Invest in My 401K?
An important part of retirement financial planning is funding your 401K plan.
But if you're like most people in the country, you've recently seen your 401K balance go down by somewhere between 30% - 50% over the last year.
Now granted, it's back up some from it's lows.
But it's still a long ways from where it was a year ago.
To make matters worse, now due to the recession and company wide cutbacks, your employer has announced that it will no longer be making matching contributions to your account.
You're probably asking yourself, "Is it even worth participating any more?" There are still many good reasons to contribute to your 401K plan, even if your employer isn't.
And about the market being down so much? That's one of the biggest reasons why you should be constantly adding money to your 401K plan now.
If in fact you have lost a lot of money in your account lately, the best thing you can do at this point is stay invested.
You've already paid for the risk of the market (by riding it down).
And you still own the same amount of shares that you had a year ago, they're just worth less per share.
But as the market comes back, those shares will increase in value and eventually get back up to where they once were.
In addition to that, by continuing to contribute to your plan each month, you're buying more and more shares at these lower prices.
The good thing about that is you are able to buy more shares with each dollar than you used to be.
In some cases, twice as many shares! As the market recovers and those shares get back to where they once were, your account will be worth much more than it was back then.
You will have quite a few more shares of each fund than you did a year ago, and you'll be back on track.
Eventually, as things improve, your employer will likely start making matching contributions once again.
But for now, don't worry about that.
Don't be tempted to spend that extra 10% that you were putting into your 401K plan.
If you stop contributing to your plan and start seeing that money in your paycheck, it will be very difficult later on to start contributing once again.
The one exception to this would be if you are in a financial bind and you really need the extra cash in your paycheck.
It would be better to forego your 401K contributions so that you can pay your bills and put food on your table than to save for retirement at this point.
Don't end up piling up debt on expensive credit cards while adding money to your retirement plan each month.
If this is your situation, stop contributing to your plan until you can stabilize your finances.
But if you're like most people in the country, you've recently seen your 401K balance go down by somewhere between 30% - 50% over the last year.
Now granted, it's back up some from it's lows.
But it's still a long ways from where it was a year ago.
To make matters worse, now due to the recession and company wide cutbacks, your employer has announced that it will no longer be making matching contributions to your account.
You're probably asking yourself, "Is it even worth participating any more?" There are still many good reasons to contribute to your 401K plan, even if your employer isn't.
And about the market being down so much? That's one of the biggest reasons why you should be constantly adding money to your 401K plan now.
If in fact you have lost a lot of money in your account lately, the best thing you can do at this point is stay invested.
You've already paid for the risk of the market (by riding it down).
And you still own the same amount of shares that you had a year ago, they're just worth less per share.
But as the market comes back, those shares will increase in value and eventually get back up to where they once were.
In addition to that, by continuing to contribute to your plan each month, you're buying more and more shares at these lower prices.
The good thing about that is you are able to buy more shares with each dollar than you used to be.
In some cases, twice as many shares! As the market recovers and those shares get back to where they once were, your account will be worth much more than it was back then.
You will have quite a few more shares of each fund than you did a year ago, and you'll be back on track.
Eventually, as things improve, your employer will likely start making matching contributions once again.
But for now, don't worry about that.
Don't be tempted to spend that extra 10% that you were putting into your 401K plan.
If you stop contributing to your plan and start seeing that money in your paycheck, it will be very difficult later on to start contributing once again.
The one exception to this would be if you are in a financial bind and you really need the extra cash in your paycheck.
It would be better to forego your 401K contributions so that you can pay your bills and put food on your table than to save for retirement at this point.
Don't end up piling up debt on expensive credit cards while adding money to your retirement plan each month.
If this is your situation, stop contributing to your plan until you can stabilize your finances.
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