If you’re like the average American these days, Wall Street’s recent ups and downs have probably left you feeling a bit sick to your stomach, especially now that the market’s dropped more than 20%–officially entering bear territory–and gutting our 401(k) accounts. 

For many of us, these company-sponsored, tax-deferred savings plans represent both our biggest chunk of stock holdings and the foundation of our retirement nest egg. This is particularly true for those with substantial employer-matching programs that created both major profits and a reduction in taxable income for participants. 

So it’s not surprising that financial planning Experts on JustAnswer are getting flooded with questions now from worried people asking such questions as “What should I do with my 401(k) now?,” and “Should I stop contributing to my 401(k)?” 

According to JustAnswer Finance Expert Jeffrey Stouffer, a certified financial planner, “It’s when the market drops and the value of the account falls that what was once considered a long-term investment is converted to a short-term ‘how to protect this nest egg’ strategy–the result of emotions influencing an earlier rational decision. It is at this point a pause is to be taken on what to do before any errors are made.”

Time for Self-Assessment: How Close Are You to Retirement? 

According to Stouffer, this is the time to take a self-assessment of how close you are to retirement to inform the next best steps. 

“For example, the closer you are to retirement, an appropriate decision may be to rebalance the 401(k) to reduce exposure to the riskier and volatile investments such as small cap stock funds towards an increase of funds that have a shorter time frame, such as target date funds.” 

However, he points out, “If retirement is still many years in the future, the current account allocation may be fine, or perhaps an adjustment to have more in the riskier group is in order.”  

Whichever path to take is a personal choice. The other decision is limited to maintaining, or if possible, increasing contributions. According to Stouffer, it’s important to consider that “the power of dollar cost averaging will be put to use during these periods when funds values are depressed due to market conditions.” 

Overall, Stouffer and other JustAnswer Finance Experts say it’s important for everyone right now to consider the analogy of retirement investing as a journey on the ocean. During calm seas, all is well and laying on the deck is enjoyable. But when a storm arrives, it’s time to haul in the sails, tighten the hatches and keep a close eye on the horizon while guiding the boat through choppy seas. Whatever measures you can take to ensure your boat endures the weather and you don’t have to bail out and swim for shore is a good move. But otherwise, it’s a matter of following the tried and true advice of “staying the course.” According to Stouffer, “It’s how you adjust the sails and resolve to get through these times that leads to smoother days ahead.”

For more helpful information from JustAnswer Experts, view all blogs here.

If you need to speak to a Finance Expert or have questions on what to do with your 401K, contact us here 

BIO: JustAnswer Finance Expert Jeffrey Stouffer 

In addition to working as a Finance Expert on JustAnswer, answering people’s questions about investments, financial planning and more, Jeffrey L Stouffer (Jeff) holds the CFP® and CAIA designations and is the principal of Mercantile Advisors LLC, a state registered investment advisor (RIA)and commodity trading advisor (CTA), in Alexandria VA. He has over 35 years of experience in financial services and endured many market cycles.

This content was originally published here.

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