Your 401(k) retirement plan is losing money — what do you do now?
Unfortunately, market volatility is an aspect that affects every investor. Rather than risk your investment through rash decisions, it’s vital that you first discover what’s causing your account to drop. When you know what the root of your lost savings is, you can better respond to the situation with more knowledge.
Let’s uncover the various reasons your 401(k) may be losing money and inspect your response options.
What’s causing the drop in your 401(k) savings?
While a 401(k) is a safe place for your money, it’s not immune to changes in the market. This type of plan isn’t a savings account, it’s an investment option that will grow and fall over time. If you constantly check your invested money, it may seem like your account balance is constantly in the red. While it’s fairly normal to have dips every so often, it’s important that you understand whether this is an organic decrease or if you need to make some subtle adjustments to your investment allocation.
There are a few different reasons your 401(k) may be losing money:
The stock market
The first factor that may be the root cause of your decreased savings is a down period in the stock market or a market crash. Your investment will lose or gain money based on the success of your stock and mutual fund portfolio in the market. When the market drops, your investments will follow — and vice versa.
The Federal Deposit Insurance Corp. (FDIC) is an independent federal agency that insures deposits into U.S. banks to protect both the organizations and consumers in the event of bank failures. Because the FDIC doesn’t insure 401(k) plan assets, growth of this asset isn’t guarenteed.
The company or industry invested in
Your 401(k) may also be losing money because of the company or industry you’re invested in. While the entity that you put money into may have originally been successful, your industry or company stock could be dropping due to the company or industry no longer doing well.
Expensive fees
The last factor that can commonly lower plan participants’ savings is high fees. Some 401(k) plans have large administrative and management fees that can burn a hole in investment returns. It’s important to pay attention to all costs associated with participating in your company’s retirement plan.
How to respond to decreased retirement savings
Before you make a brash decision about your 401(k) plan, it’s important to know what the best response is for your personal situation. Try out these helpful strategies as you navigate through your retirement savings plan:
Remain consistent
One of the most essential facts to keep in mind is the market will continue to move up and down no matter what. While it may seem like a good idea to pull out your money and stop investing in low periods, it may not be the best decision for you in the long run. Unless your financial advisor recommends you sell your individual stocks or funds, continuing to invest may be the best move to make.
Educate yourself
Without the right information at your fingertips, it can be difficult to make intelligent decisions. Use your employer-provided resources to learn about your 401(k) retirement fund options or educate yourself on essential retirement savings details.
Seek help from a financial professional
While it’s important to do your due diligence when making financial decisions, it’s vital that you have a financial professional you can trust. An advisor can help guide you through the world of retirement account savings while keeping your business goals and financial needs in mind.
Don’t panic: Marsh McLennan Agency can help
If you don’t have a financial advisor that’s assisting with your retirement account amidst market volatility, discovering your plan assets' risk tolerance, or helping you proactively plan for the future, now is the time to partner with an experienced professional. At Marsh McLennan Agency, our team offers retirement services and plan education, as well as private wealth management tailored to fit your personal requirements.
Marsh McLennan Agency offers:
- Wealth management.
- Employer retirement plan advisory services.
- Financial well-being.
